A Legacy of the New Deal, Electric Cooperatives Struggle to Democratize and Make a Green Transition

What began three years ago as a campaign to stop the spraying of weedkiller under power lines near homes in the Appalachian mountains of northeast Tennessee, has become an example of a more democratic process at electric cooperatives across the country. 

Member-owners of the Powell Valley Rural Electric Cooperative earned the right to opt-out of spraying, and persuaded their co-op board to let them attend board meetings in ways that were previously prohibited. 

Some members of Powell Valley have also begun to ask for a program to help members finance energy efficiency measures to save money.

These were small steps toward a more transparent and responsive electricity provider, but small steps can lead to bigger ones, said Bill Kornrich, a retired arts administrator who, with friends and neighbors, is part of Powell Valley Electric Co-op Member Voices, a group that’s been behind the reforms.

“The co-op works,” Kornrich said as he sat on a porch swing with a view of the Clinch River Valley, where wild dogwood trees flower in the spring. He describes the land as his “piece of heaven.”

The co-op, he said, “has a great outage record. Its linemen are good and workers and staff do good jobs. It’s reliable. But we’d like it to be the best in the state. If the members get engaged, whether on the spraying issue or on bylaws amendments or whatever, then there can be movement.”

From the suburbs to the back corners of America, electric cooperatives serve 42 million people across 56 percent of the country, according to the National Rural Electric Cooperative Association. There are 63 generation and transmission cooperatives that provide wholesale power to 835 retail distribution co-ops. Some participate in regional grid networks and purchase power from investor-owned utilities.

But as part of an energy democracy movement nationally, customers of electric cooperatives from Tennessee and Kentucky to Colorado and New Mexico and beyond, are demanding greater transparency and expanded access to renewable energy from elected boards that often remain hidebound and even “anti-consumer,” according to one congressman. 

While the co-ops stand as one of the most successful and lasting legacies of President Franklin D. Roosevelt’s New Deal, many remain tied to expensive, highly polluting coal plants, leaving them in need of a massive refinancing package, now before Congress, to make the transition to a greener energy economy. 

“We need a paradigm shift to get utilities to think about what is best for their members,” said Chris Woolery, a residential energy coordinator for the Mountain Association, a community development nonprofit working on energy and economic issues in Kentucky.

The Electrification of Rural America

When Roosevelt won the presidency in 1932, the nation was in the midst of the Great Depression. Just 10 percent of people living in rural America had electricity, compared to 70 percent to 90 percent in cities.

“We really had two countries, urban and rural,” said Douglas Brinkley, a presidential historian, Rice University professor and author of Rightful Heritage: Franklin D. Roosevelt and the Land of America. “The divide was massive. One was dealing with kerosene lamps and the other had major factories making automobiles.”

Roosevelt was from a rural county in New York and loved farmers. “He’d drive all over America in his car,” Brinkley said, “and he wanted to get them electricity, and greater prosperity.”

In 1935, Roosevelt created the Rural Electrification Administration by executive order. Congress began funding it the following year as a major provision in his New Deal to lift the country out of economic depression.

He saw community-run cooperatives, established with funding from the federal government, as a practical way to bring electricity to sparsely  populated areas, Brinkley said.

Rural people were poor and “most of them were living like their parents or grandparents had, relying on firewood for cooking and heating,” said John Riggs, a retired senior federal energy official and the author of High Tension: FDR’s Battle to Power America. 

Electrifying a third of America and dramatically changing millions of lives, he said, was “right up there with Social Security as the most beneficial program Roosevelt did for individuals.” 

Many Co-Ops Have Become ‘Anti-Consumer’

Electric cooperatives began with the high ideals of neighbors banding together, and representatives of cooperatives insist that community focus remains in their DNA. But decades later, critics say too many are now run like fiefdoms, with little transparency or meaningful input from the members who actually own them.

One poster child for a co-op that went astray is outside Columbia, South Carolina. More than 1,500 members of Tri-County Electric showed up to a meeting in August 2018 to boot out its entire board of directors, after the State newspaper revealed that they had enjoyed excessive pay and expensive dinners, held secretive meetings and received cash bonuses.

The outrage also provided a case study in the power that co-op members do have—if they are able to use it.

Appalachian Voices, an environmental nonprofit working with co-op members like Kornrich, has developed a scorecard for Tennessee’s 23 electric cooperatives, all of which get their electricity from the Tennessee Valley Authority, the nation’s largest public utility and another New Deal legacy. 

The scorecard gives out grades for categories such as democratic governance, financial compensation to board members, chief executive officers and program services. 

The Powell Valley co-op fared pretty well, getting mostly B’s.

But across the map, Appalachian Voices assigned a lot of C’s, D’s and F’s, finding that most co-ops in Tennessee have a long way to go to be more responsive to their members, including providing workable energy efficiency programs and solar offerings. 

Board election policies are also skewed to favor incumbents, Appalachian Voices found. None in Tennessee has term limits for board members and very few use an independent third party to verify votes, according to the scorecard.

It’s difficult for the members of the local cooperatives to keep an eye on the businesses and services of their cooperatives without transparency, said Bri Knisley, the Appalachian Voices’ Tennessee campaign coordinator, and co-chairwoman of a regional energy democracy working group.

“I would think with a democratic governance, more member-owner participation, we would see policies and programs that better reflect the needs of the communities serviced by the co-ops,” she said.

That Tennessee’s cooperatives would score poorly was no surprise to U.S. Rep. Jim Cooper (D-Nashville), who has been a critic of them for years. In 2008, Cooper authored a detailed take-down of cooperatives in the Harvard Journal of Legislation, and little has changed in 13 years, he said in a recent interview. 

“We have made no progress in protecting consumers because co-ops have such strong political power,” he said.

Cooperative board members and managers, he said,  “want to pay themselves good benefits. They don’t want anybody rocking the boat. They don’t want any outsiders looking at their books.

“It’s really shocking. These were the most pro-consumer organizations in America and now they have turned mostly anti-consumer.”

A spokesman for the state association of electric cooperatives called the Appalachian Voices scorecard misleading and disputed Cooper’s comments.

Trent Scott, vice president of corporate strategy for the Tennessee Electric Cooperative Association, also criticized the scorecard. “I don’t know all that much about energy democracy,” he added.

All co-ops in Tennessee have provisions “to allow members to address the board. Some hold open meetings,” Scott said. “Some have question-and-answer periods. Some members can request time on an agenda.”

Locally elected boards, he said, “have made decades of wise investments and sound financial decisions” and provide annual financial reports to members. 

Scott also cited a 2019 survey of about 1,000 co-op members in Tennessee that gave high marks for faith and trust. “The opinions that matter most to co-ops are those of our consumer-owners, and they are extremely pleased with their local cooperatives,” he said.

Many Members Face High Energy Burdens, Often Linked to Coal Plants

Still, across Tennessee, many co-op members are poor and with power bills that exceed 10 percent of their income, what Knisley described as a high energy burden. 

A good way to reduce that burden is through energy efficiency, but a lot of members are being shut out because they cannot get loans for new heat pumps, or insulation.

Appalachian Voices found that only one Tennessee cooperative offers something called “pay as you save,” in which the co-op funds energy efficiency work and recovers the cost through energy savings. The obligation is attached to a customer’s meter, not the customer, and traditional credit checks are not required.

Appalachian Electric Cooperative, also in east Tennessee, launched “pay as you save” in 2019 and has been able to help dozens of customers, said Greg Williams, executive vice president and general manager. 

About a quarter of Appalachian Electric members who were applying for energy efficiency loans could not get them because they had low credit scores, he said.

“They’d basically walk out without a solution,” he said. “They’d continue to have high electric bills year after year.”

“Being a co-op, the reason we exist is to serve the members, who are our owners,” Williams said. “If there is a way to be more efficient, we will do that.”

A looming financial burden is the extent to which cooperatives remain heavily invested in coal plants, when compared to either investor-owned utilities or municipal utilities, according to the U.S. Energy Information Agency.

In fact, 57 percent of cooperatives’ electricity generating capacity was from coal in 2019, the most current year for which data was available from the agency. That compares to 31 percent for investor-owned utilities and 30 percent for municipal utilities. The TVA stands at 19 percent.

Because of their high greenhouse gas emissions, their increasing lack of competitiveness and new regulations or policies to protect the climate, coal plants are at risk of being shut down or becoming obsolete before they are fully paid off. That’s also becoming a concern for gas-powered plants.

One example: the East Kentucky Power Cooperative, which serves 16 owner-member electric cooperatives in 87 Kentucky counties. It has $2.7 billion in long-term debt, according to its 2019 annual report posted on its website. The cooperative owns and operates two coal-fired plants, one with an anticipated lifespan into the 2030s, and the other into the 2050s, according to a cooperative spokesman. EKPC also operates gas burners it uses during peak demand.

East Kentucky power is paying nearly $600,000 a day for debt service, “largely for coal plants that are not cost-effective and not competitive on the market and these obligations are hurting Kentuckians,” said Woolery, of the nonprofit Mountain Association, citing numbers calculated out of the cooperative’s 2019 annual report.

Nick Comer, the EKPC spokesman, acknowledged the cooperative’s large debt and said he hopes that coal plants are not allowed to become stranded assets. “That would be a cost borne by all our members,” he said. “Reliability and affordability and now sustainability are going to remain the top priorities. To me, that is a balancing act.”

EKPC has a goal of 35 percent reduction in greenhouse gas emissions by 2035 and 70 percent by 2050, which falls short of what scientists have said is necessary to meet the goals of the Paris climate agreement.

Breaking Away for More Renewable Energy

Given this historic reliance on expensive coal plants, cooperative members in the Mountain West, the Upper Midwest and the Southeast are pushing co-ops to accelerate the transition to clean power.

Co-ops in Colorado and New Mexico, for example, are breaking away from their supplier of electricity—the Tri-State Generation and Transmission Association. They are demanding better access to renewable energy, more affordable rates and more say in how they buy or produce power, according to a report last year by the Institute for Energy Economics and Financial Analysis, a think tank that promotes alternative energy. 

Last month in Tennessee, the Gibson, Joe Wheeler and Volunteer cooperatives joined one municipal utility, the Athens Utility Board, in asking the Federal Energy Regulatory Commission to make TVA open its transmission lines to outside sources of electricity.

They want access to new and cheaper electricity, in what could be seen as an echo of a similar push in Memphis. There, the city-owned utility that delivers electricity to Memphis continues to explore its own break from the TVA, after studying how access to more renewable energy could save ratepayers money.

That’s smart economics, given the increasing disparity between the falling cost of new renewable power and the rising cost of older electricity generation, especially from coal, said Seth Feaster, an IEEFA analyst.

“Broadly, we are seeing a growing resistance by some co-ops and associations across the country over a number of restrictive constraints imposed on them by the larger power groups they belong to,” Feaster said.

A Zero-Carbon Transition Could Cost $100 Billion 

The National Rural Electric Cooperative Association has touted a bill in Congress that it says could save electric cooperatives more than $10 billion by allowing them to reprice loans they received from the federal Rural Utilities Service at lower interest rates.

“There is debt out there, billions of dollars to build coal-plants and not just the original debt, but debt to pay for emissions controls,” said Scott Peterson, senior vice president of communications for the national association. “We want to be able to service those debts.”

He, too, is worried about stranded assets.

“Fundamentally, we would want some sort of just and reasonable transition to a zero-carbon economy that would deliver affordability and reliability to the communities we serve,” Peterson said.

The national association’s plan does not go far enough, said Erik Hatlestad, the energy democracy program director for the nonprofit group, Clean Up the River Environment Minnesota, or CURE.

A coalition is growing around the idea for the federal government to offer forgivable loans for cooperatives to pay off all or some of their debt, which Hatlestad estimates to be near $100 billion if the cooperatives shed their investments in coal and other fossil fuels, and to help pay for an equitable economic transition in fossil fuel communities.

“For $100 billion, if we wanted to spend that kind of money, we could entirely change the energy system in rural America,” Hatlestad said. 

It took a massive social spending program to electrify rural areas, he said.

“In order to have the transition to reduce carbon emissions and have prosperous rural communities around clean energy, we are going to have to have the same kind of social service spending programs to get us there,” he said.

This article has been updated after an earlier version incorrectly stated that East Kentucky Power was paying $1.69 million a day for debt service, largely on its coal plants. The correct amount is about $600,000 a day.