State regulators adopted rules Wednesday that require the directors of utility cooperatives to tell each of their 900,000 members how much compensation they are receiving and then requiring the customers to vote on whether those board members should receive the benefits.
The five elected members of the Louisiana Public Service Commission unanimously approved two orders aimed at reining in what they called compensation that was too lucrative.
One rule approved requires the cooperatives to insert into monthly bills details of how the board members are compensated. The second allows co-ops to change voting procedures in co-op bylaws, such as choosing to eliminate quorum requirements, to allow members to vote on whether they agree with the compensation packages the boards had given themselves.
The order allows variety of voting techniques, by mail for instance. But the wording on the ballot must be approved by the Public Service Commission and regulators must choose an accountant to oversee the vote count. The wording also imposes term limits on board members and requires that if the members approve insurance for directors, the policies are at the same level as the utility’s employees receive.
Commissioners expressed shock upon learning how lucrative the compensation packages are for board members who run the 11 cooperatives that provide electricity to a little less than half the state.
Co-ops were started during the New Deal to provide electricity, mostly in rural areas without enough residents to attract profit-motivated utilities. What Entergy calls customers, the co-ops call members because the members own the utility. Set up as a nonprofit, the cooperative board members are forbidden from receiving pay. But over time, the board members started compensating themselves to attend meetings, for travel and with insurance policies.
The money came out of whatever funds are left over after the bills for acquiring and delivering electricity are paid. The alternative would have been to use the money to lower electricity rates for members.
The matter came to the regulators’ attention when several of the cooperatives applied for rate increases and Public Service Commission staff noticed how much of the “operating margin” revenues were spent on perks.
“They’re shady,” said Commissioner Foster Campbell, D-Bossier Parish. “This has to do with absolute greed, and they have been doing it for years.”
“Member ownership is the strength of the co-op business model. That strength is contingent on transparency and the members’ access to information,” Campbell said, adding that at an average compensation of about $27,000 annually, co-op board members are better paid than state legislators and local school board members but do far less work.
“The commission’s action … strengthens the co-op model by requiring term limits and ensuring members have timely access to information," Commissioner Craig Greene, R-Baton Rouge, said in a news release.
Wording in the orders changed several times during debate. “I don’t know what it says exactly, and I don’t think they (the commissioners) do either,” said Jeff Arnold, whose Association of Louisiana Electric Cooperatives represents all but three of the utilities.
But he does feel the rules are too intrusive. The commission sets the rates that customers pay for electricity for each month and the commissioners have some ability to weigh in on a utility’s business decisions that impact power costs. But Arnold said the new rules go too far by essentially allowing government regulators to require business practices that don’t affect rates.
“The motion forces bylaws on these private corporations that their membership hasn’t voted on,” Arnold said.
His association is meeting Monday to decide how to react to the new rules. Litigation is a possibility, he said.