Rural electric cooperatives differ from investor-owned and city-owned electric utilities in an important way: they are owned by their members, or those who purchase power from them. As owners, co-op members have a unique right to participate in decision-making at their electric co-op, but many co-ops in Virginia aren’t living up to their responsibilities to involve member-owners in their governance. Co-ops are graded in four key areas: board meetings, bylaws, board elections, and information accessibility. Access the Scorecard here, and read on for the full methodology.
On Tuesday December 21, 2021, at 9:00 am, the case of Heald, et al. v. Rappahannock Electric Cooperative goes to trial before Judge Joseph J. Ellis, of the Virginia Fifteenth Judicial Circuit, in Spotsylvania Courthouse, VA. The court is located at 9107 Judicial Center Lane Spotsylvania, VA 22553. See links below for prior news coverage of this matter. The trial is expected to shed an unusual amount of light on the generally secret work of the board of directors of Rappahannock Electric Cooperative (REC) one of Virginia’s largest electric cooperatives, and the opaque manner in which REC’s board members control the outcome of all annual board-of-director elections.
The issue at trial is whether REC’s board improperly refused to give the plaintiffs a form to use to gather signatures for proposed changes to REC’s bylaws. The three plaintiffs, all member-owners of REC, are Seth Heald, a retired Justice Department lawyer; Dr. Mike Murphy, a retired Clarke County school system superintendent; and Brigadier Gen. John Levasseur (US Army Retired), a former member of REC’s board. An electric cooperative, like any consumer cooperative, is owned by its consumers, who are referred to as “member-owners.”
The proposed bylaw changes (which were submitted to REC in April 2018) would require REC to:
allow REC member-owners to observe their co-op’s board of directors meetings,
alter its proxy form in a manner to reduce the likelihood of REC board incumbents controlling all REC board-election outcomes, and
disclose its board of directors’ compensation once a year in the cooperative’s member magazine.
Virginia law and REC bylaws allow electric cooperative members to propose bylaw changes for co-op members to vote on at the co-op’s annual member meeting. REC bylaws require that a co-op member wishing to propose a bylaw change collect 500 supporting signatures using a form provided by the board. Then the proposed change can be voted on at the cooperative’s annual meeting. Richard Johnstone, former CEO of the Virginia, Maryland, and Delaware Association of Electric Cooperatives, has called voting on bylaw changes at Virginia electric co-op annual meetings “an old-fashioned exercise in democracy that’s both refreshing and resilient, a living reminder of a time when civics was still widely taught in school; when neighbors would gather regularly to catch up on news; and when citizens would get together to make important decisions about their shared welfare ….”
But REC refused to provide the requested petition form, claiming that the plaintiffs’ proposed bylaw changes would violate Virginia law. In a 2020 letter decision the court rejected most of REC’s arguments but said a trial is necessary to determine whether the proposed bylaw changes would “alter the existing bylaws to the extent that the Board could not continue to execute its statutory role.”
Two of the three 2018 bylaw proposals are based on similar proposals that Heald submitted to REC in 2012. At that time there was no requirement that a proposal be supported by any petition signatures. REC refused to put the 2012 proposals on the ballot at the 2012 annual meeting and the board then amended REC bylaws to add the 500-signature requirement.
Plaintiffs’ challenge to REC’s actions was originally filed at the Virginia State Corporation Commission, but the Commission determined that the case should be brought in a Virginia court, so the case was then filed with the Fifteenth Judicial Circuit Court.
A governance task force of the National Rural Electric Cooperatives Association (NRECA) issued a report in 2018 recommending that electric co-ops:
allow their member-owners to observe board of director meetings,
avoid proxy-voting practices that give board members control of board-election outcomes, and
Repower REC has hosted two public events on rural broadband with national experts on the topic. The first in August of 2020 and the second in February 2021. Learn more and watch the recordings of these events below. We created a handout on broadband resources for the February event.
In October, 2020, two landowners in Culpeper County, Cynthia and John Grano, sued REC in federal court, alleging that a 2020 Virginia statute designed to help Virginia electric cooperatives deploy high-speed fiber-to-the-home broadband violated the Granos’ constitutional rights. To help REC member owners stay informed about this suit, Repower REC is posting here pertinent documents filed in the case.
Image of power lines from Exhibit 1 in Grano lawsuit
The 2020 statute allows Virginia electric cooperatives to use existing rights of way (easements) to deploy fiber optic cable that can be used to provide high speed broadband to members’ homes. The Granos, whose property is subject to an REC easement, allege that the statute is an unconstitutional “taking” of their property rights without compensation. REC’s court filings raise several defenses, most notably that REC has not installed and does not intend to install fiber optic cable across the Granos’ property.
We provide links below to key documents that have been filed in the case so far, so that REC member-owners and others interested in understanding the issues in the lawsuit can keep themselves informed.
Readers of Rappahannock Electric Cooperative’s monthly magazine, Cooperative Living, found a surprise when the magazine’s May 2020 issue arrived. The surprise wasn’t what was in the magazine, but what was missing, calling to mind Sherlock Holmes’s key insight in Arthur Conan Doyle’s story The Adventure ofSilver Blaze, featuring a dog that didn’t bark. As Holmes explained to a Scotland Yard detective, sometimes what didn’t happen is as significant as what did.
In an annual tradition going back at least a decade and likely much longer, REC each May publishes in its member magazine a list of co-op members or former members whom REC owes money to but has lost track of. The list usually takes up around two full pages, with perhaps 500 to 800 names listed in small print. Readers are encouraged to look for their own names as well as names of others, and to notify REC if they have information about how to find these missing people. The funds in question are “retired capital credits,” a/k/a “patronage capital,” meaning money belonging to the co-op member-owners that has been invested in the co-op for a time and can now be returned. (As a cooperative, REC is owned by its customers, who are called “member-owners” or just “members.”)
But this year, instead of listing the names in its magazine, REC advised readers they could view the list online. The magazine gave no explanation why REC had changed its longstanding annual practice of publishing the list in the magazine, which is mailed to all of REC’s roughly 140,000 member-owners, some of whom don’t have internet service.
So, wondering why REC had changed its publication practice, I took a look at the list online and discovered that it was 74 pages long, with about 21,000 names.
