Democratic Governance Scorecard: Our Scoring Methodology

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.

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REC goes to trial to block member-owner by-law proposals

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:

  1. allow REC member-owners to observe their co-op’s board of directors meetings,
  2. alter its proxy form in a manner to reduce the likelihood of REC board incumbents controlling all REC board-election outcomes, and
  3. 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:

  1. allow their member-owners to observe board of director meetings,
  2. avoid proxy-voting practices that give board members control of board-election outcomes, and
  3. embrace robust disclosure of board compensation. REC’s president and CEO, John Hewa, served on that task force. For details of the governance report see: https://powerforthepeopleva.com/2019/12/17/release-of-secret-nreca-governance-report-supports-virginia-electric-co-op-reform-groups-efforts-to-restore-democracy-at-their-utilities/

For earlier press coverage of this case see:

“Rapp Electric Co-op hit with legal petition” in the Rappahannock News in August, 2018: https://www.rappnews.com/news/government/rapp-electric-co-op-hit-with-legal-petition/article_b2e9127b-21a8-5c3d-8276-1208eb656f82.html

Progress at REC: PAYS program & board minutes posted

Some good things are happening at Rappahannock Electric Cooperative. We launched the Repower REC campaign three years ago to bring greater transparency, better energy options, and fair democratic governance to the electric utility that we all own. We’re happy to say the co-op has listened to us and made some significant improvements in the area of financial transparency. REC’s financial statements and tax returns are now posted on the REC website. If you examine the tax returns you can see how much the co-op’s nine board members are paid. What’s more, the co-op has begun posting minutes of board meetings, which allows member-owners to get a general idea of topics discussed by the board. That’s not full transparency, but it’s a start.

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Broadband & Grano Lawsuit

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.

1. Grano complaint and exhibits:

2. REC’s brief in support of motion to dismiss, and supporting declaration.

3. Granos’ brief opposing motion to dismiss & exhibit 1.

4. REC’s response to Grano brief.

Capital Credit Update Blog

Seth Heald wrote this blog for Power for the People VA in May of 2020: “The dog that didn’t bark: The case of the missing electric co-op members” around Rappahannock Electric Co-op capital credits paid annually to co-op members. Here’s an excerpt:

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 of Silver 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.

Read the full story here from Power for the People VA

REC new effort to lower peak demand, what it means for you

Last month Rappahannock Electric Cooperative (REC) announced an innovative new pilot program. The goal is to change how much and when member-owners use electricity. REC wants to reduce how much electricity member-owners use on the hottest summer afternoons. This is when demand for electricity is highest. REC will pay some member-owners to use less electricity at these times.

REC says reducing demand at these times will save a significant amount of money. REC says the amount it pays for wholesale electricity is not just based on the total amount of electricity it purchases. A significant part of the cost is how much electricity the utility buys during the five highest-consumption (peak) hours each summer. REC passes its wholesale power costs right on to us consumers. REC says the total cost of our electricity will go down if it can lower our total power consumption during peak times.

No one can know ahead of time which five hours each summer will end up being the peak five hours. But utilities have a pretty good idea. They know that they tend to be in the late afternoon on the very hottest summer weekdays. They can use weather forecasts to predict those days ahead of time. REC wants to pay member-owners to reduce their consumption between 4 and 6 p.m. on approximately 15 hot summer days. It says this will reduce REC’s total consumption on what eventually turn out to be the year’s five peak demand hours.

Under the program, REC will notify participating member-owners a day ahead of each of the likely 15 peak days. This will allow those member-owners to voluntarily reduce their electricity consumption the next day during the selected hours. REC will then compare their usage during those peak hours with their average consumption during the same period on the ten previous non-peak weekdays. It will pay the member-owner 75¢ for each kilowatt-hour reduction in usage in comparison to their ten-day average. Participating member-owners can save substantial amounts. But, all REC members will save by the reduction in overall year-long wholesale power costs.

We commend REC for proposing this program. It has the potential to reduce all REC member-owners’ bills, even if they don’t participate in the program. REC’s proposal shows that reducing power consumption on hot summer afternoons saves money for everyone.

Sadly, REC hasn’t acknowledged member-owner installed rooftop solar offers similar benefits. It can also help lower the co-op’s peak summer demand. REC officials and board members have wrongly suggested members-owners who don’t have solar “subsidize” those who do. REC has been reluctant to admit that homeowner solar, and also efficiency upgrades, have a significant role to play in reducing costs for all co-op members.

Other co-ops have figured this out. Arkansas’ Ouachita Electric Co-op and North Carolina’s Roanoke Electric Co-op have. They both have programs to help their members install and pay for efficiency upgrades and rooftop solar. This reduces bills for all co-op members.

This is another example of how REC’s unfair election practices harm member owners. Giving current board members control of election outcomes has kept the board of directors insulated from new ideas and member concerns. The co-op’s new pilot program is a small step in the right direction. REC still has a long way to go to catch up with industry leaders like Ouachita and Roanoke. These cooperatives are reducing members’ bills while increasing the share of clean energy in their power mix.

You can read REC’s State Corporation Commission filing to get full details about the proposal. And if you want even more detail on how it works you can read this explainer from utility consulting firm Power System Engineering.

National Electric Co-op Trade Association Report Reveals Repower REC’s Key Demands Are Best Governance Practices

NRECA’s own Governance Task Force Report supports the key governance reforms Repower REC seeks. An REC vice president was on the task force.

Repower REC has argued for two years that Rappahannock Electric Cooperative (REC) needs reform. Now we’ve learned that a formerly secret report, written by REC’s own trade association and made public last week by a watchdog organization, agrees with us. A National Rural Electric Cooperative Association (NRECA) task force authored the report. NRECA is the national trade association for America’s 900-plus electric co-ops. Its report supports two key planks of our campaign:

  1. REC should reform its board of directors election process; and
  2. Member-owners should be able to observe board meetings.

But REC’s board refuses to discuss, much less put these reforms in place.

The NRECA task force had 20 distinguished electric-co-op leaders. Their job was to examine governance problems at the nation’s electric co-ops. The NRECA Governance Task Force issued its report in February 2018. It was available to all electric co-op board members and managers. It is reasonable to assume REC board members and senior management have been aware of its recommendations since early 2018. REC Vice President John Hewa was a member of the task force.

REC’s blank proxy election practice allows REC’s board to determine election outcomes. Member-owners who leave their proxy ballot forms blank are deemed to have delegated their vote to the board itself to cast for them. This gives sitting board members the power to assign the member-owner’s vote as the board sees fit. As a result, the board’s controls several thousand blank proxies each year.

The board has used these blank proxies to alter election results three times in the past four elections. Three times the board-favored candidate failed to receive the most direct votes. But these candidates still won election because the board cast thousands of blank proxy votes for the board’s favored candidate.

The NRECA report recommends against giving incumbent boards a large number of proxy votes. It says this “may give the perception that the board controls or improperly influences director elections.”

At REC it’s not just a perception. It’s the reality.

John Manzari ran for a board seat this past August. He ran on a platform seeking reforms that we now know NRECA recommends. He received the majority of votes cast directly by members. But he still lost the election because the board cast more than 2,000 blank proxy votes for the incumbent.

REC employees solicited and collected many of these blank proxies from member-owners. They did so when member-owners came to the co-op’s offices to pay a bill in cash or resolve a payment issue. REC employees talked up the prizes these co-op members could win by signing the form.

The employees said it was okay to leave the form blank. They insisted the form be returned on the spot to the employee. This leaves the members no time to inform themselves about the candidates.

The employees’ action ran counter to the stated rules of the election. Member-owners were to mail their ballots to an independent election administrator. The REC employees’ irregular practice prevented members from informing themselves about candidates. Worse, it encouraged member-owners to cast blank proxies only to have a chance to win a valuable prize.

By allowing these election practices incumbent REC board members are rigging the system. They’re allowing their favored candidates to hold on to well-paid positions for many decades. They want board members to do so without real accountability to the co-op’s member owners. These favored candidates are usually sitting board members themselves.

NRECA’s governance task force recommended another reform Repower REC seeks. Repower REC has urged REC to open its board meetings to co-op member-owners. The Task Force said open meetings “facilitate transparency and openness.” Further, the Task Force argued open board meetings “strengthen the democratic nature of cooperatives.” Many electric co-ops around the country allow this. REC’s board has fiercely resisted it.

This has forced Repower REC to go to court. We’ve done so to demand the board allow us to petition for a member-owner vote to change the board’s unfair practice. REC contends member-owners don’t have the right to vote on whether their co-op’s board meetings should be open for member-owners to observe.

The REC board’s refusal to consider these issues in a dialogue with Repower REC is unjustifiable. Even more disturbing, REC’s board accused Repower REC’s co-founders of lacking “good faith” for even proposing these two reforms.

We now know these are same reforms REC’s own trade association recommended. Further, an REC vice president served on the task force that made them.

We don’t know why REC’s board has so strongly resisted common-sense, democratic, NRECA-recommended reforms. These needed changes would bring our co-op in line with best governance practices.

It’s hard to avoid the conclusion that board members don’t want to compete on a level playing field in fair elections. Nor do they want their constituents to know what board members are doing. REC’s board must end the undemocratic blank proxy system that allows the board to control election outcomes, and to open board meetings.

Election results: Cooperative members want change

Rappahannock Electric Cooperative held its annual meeting last month and announced the results of the board election. While all three incumbents won, a full tally of the voting shows the vote was close. Importantly, but for the board’s use of its unfair blank proxy balloting system, a reform candidate would have won!

This is the first time in at least a decade that an incumbent’s challenger has earned more of what we call “real” votes than an incumbent. By “real” we mean votes other than blank proxies that the board uses to control elections.

Many REC members spoke about the confusing and unfair proxy ballot system during the meeting. They raised concerns about the level of transparency and accountability at REC as well. We knew from the beginning it would take a multi-year campaign to build strength to bring transparency, accountability, and fair elections back to our cooperative. It’s hard to win an election when your opponent has a 2,700+ vote head start.

The election results are a good time to highlight the many ways our reform campaign has already succeeded. We’ve gotten REC to disclose board compensation, audited financial statements, and election vote tallies. This information was not available to co-op members when we started. They could only get it if they knew to ask for it. They then had to sign an onerous form agreeing to pay damages to REC for unauthorized use of the information.

Now co-op members can find all this on REC’s website. We’ve also seen the Board back on its heels about its unfair proxy balloting system. This includes Board Member Chris Shipe making unfounded claims that the process is approved by the Virginia’s State Corporation Commission.

In the wake of the election, area media has continued the drumbeat of questions to the way REC operates. Check out these two pieces from the Winchester Star:

Ex-REC board member says group is ‘voting in their friends’
REC incumbents re-elected to board

Letter calls on REC to restore candidate speeches at annual meeting

Today REC reform candidates Andrea Miller, Mike Biniek, and Jack Manzari sent a letter to the Rappahannock Electric Cooperative (REC). The letter asks REC to restore time for candidate speeches during next week’s annual meeting. REC announced this change to candidates via a letter to board candidates. Not allowing for candidate speeches limits the ability of member-owners who attend the meeting to make an informed choice.

REC’s decision to cancel candidate speeches this year is another example of the lack of transparency and accountability with which REC often operates.

The board denied three co-op members’ right to start a petition that would allow for a vote on changes to the bylaws that govern how REC and its board operate. These changes would make board elections more fair and give member-owners a clearer understanding of how the electric cooperative is spending our money.

We’ve also been disheartened to learn that REC employees are soliciting on-the-spot, uninformed proxy votes from cooperative members who visit REC offices to pay their monthly bill. This practice encourages the signing of blank proxies and stacks the deck in favor of incumbent board candidates. Urging a member-owner to vote with little or no information about the candidates greatly increases the likelihood they will sign a blank proxy just to be entered to win a prize. The REC board’s unusual practice is to treat blank proxies as a delegation of the member’s vote to the board itself. In practice, this provides incumbent candidates with a 3,000-plus vote leg up in the election. No wonder well-paid board members often stay on the board for 35 to 40 years or more.

If you are an REC member-owner who has not yet voted, there’s still time to take action to reform our co-op. You can do so through your online account through Monday, August 19 at 5 p.m. Vote for Andrea Miller, Mike Biniek, and Jack Manzari to restore accountability to our electric cooperative.