PSC on 01312018 (copy)

The Louisiana Public Service Commission members are, from left to right are: Lambert C. Boissiere III, D-New Orleans, Foster Campbell, D-Bossier Parish, Eric Skrmetta, R-Metairie, Mike Francis, R-Crowley, and Craig Greene, R-Baton Rouge.

A Baton Rouge district judge ruled that the state’s utility regulators exceeded their constitutional authority in ordering changes to the way rural cooperative boards operate.

The Louisiana Public Service Commission’s has constitutionally mandated authority to regulate utilities in order to set monthly rates customers have to pay for electricity. Nineteenth Judicial District Judge Richard “Chip” Moore III, of Baton Rouge, ruled that the PSC’s “power is not absolute.”

The five elected regulators in the past had “never sought to micro-manage public utility companies as it now attempts to do in its order,” Moore wrote in his judgment publicly released Wednesday. He vacated the PSC order.

After discovering that some of the mostly part-time co-op board members were making high salaries and taking lavish trips, the PSC with unusual unanimity for such a fractious board clamped down with an April 2019 order that dictated term limits for board members, determined what constituted a quorum for making decisions, and other restrictions.

Rural co-ops were begun during the New Deal after shareholder-owned utilities refused to extend service into rural areas. The federal government in the 1930s established a way that the users of the electricity would own the utility.

Eleven rural cooperatives provide power to about a million customers in Louisiana at rates that reimburse expenses without including a profit. Investor-owned utilities, like Entergy Corp., make and sell electricity, charging their customers their expenses plus a profit.

The PSC suspended enforcement of its order after the rural electric cooperatives filed suit. The regulators could issue a similar order in the future, avoiding the specifics mentioned by Moore. Or they could appeal to the Louisiana Supreme Court. But, Moore’s findings could undermine the regulators’ authority with the privately owned utilities, if upheld by the higher court.

“We are aware of the ruling and studying its impact and we’ll be discussing the matter with the commission,” PSC Secretary Brandon Frey said Wednesday.

PSC Chairman Mike Francis, of Crowley, said the commission will decide its next step at the next meeting on Feb. 19.

“It’s what we’ve been saying all along,” Jeff Arnold said about Moore’s decision.

Arnold heads the Association of Louisiana Electric Cooperatives, which wasn’t party to the lawsuit, though seven of its member co-ops were.

The co-ops never argued that the PSC has no right to regulate. But that regulation, under state law, involves only rates charged and services rendered, such as the cost of buying and transmitting electricity, as well as dictating where that power can be sold, Arnold said.

“What the regulators did with their order was reach into the board room and basically tell a private corporation how to govern itself,” Arnold said. “The boardroom is the property of the owners and they choose how many board members, and say what the terms of their jobs are.”

He added that the PSC exaggerated its allegations that co-op board members were taking advantage of their positions – the contentions that underlay the regulators’ order.

“The judge is not familiar with what we do. He doesn’t know anything about the politics or about the abuses,” said PSC Commissioner Foster Campbell, of Bossier Parish. Regulators routinely question executives from shareholder-owned companies to ensure the outside spending doesn’t end up in the rate structure. That they similarly questioned co-op officials is not out of the ordinary, he said.

Delving into expenses is how the PSC found out that some of the co-op board members were making upwards of $50,000 a year for attending only a handful of meetings a year and that many received better health insurance coverage than full-time cooperative employees, he said.

PSC Commissioner Craig Greene, of Baton Rouge, said: “My goal as commissioner before, during, and after this suit have and will continue to be to work with the co-ops to ensure the most reliable and affordable services are provided to their members.”

Email Mark Ballard at mballard@theadvocate.com.