On Thursday, June 26, the House Committee on Oversight and Government Reform held a lengthy oversight hearing on "Government and Financial Accountability of Rural Electric Cooperatives: The Pedernales Experience."
Witnesses included the new manager of Pedernales Electric Cooperative (PEC) members of the coop and Texas state legislators who are determined to bring more transparency and accountability to coops in their state. Glenn English, CEO, National Rural Electric Cooperative Association also testified.
The hearing was requested by Rep. Jim Cooper (D-TN), a senior Member of the Committee, who published an article in the Harvard Journal of Legislation on 6/24, claiming that many cooperatives have lost their consumer-owned focus and mission. In his opening remarks, he said he regretted that Congress had to hold the hearing, because he "loves coops" and "loves coop customers." Cooper said that he has been talking privately with coop leaders for ten years, to warn them of "looming problems," but had been repeatedly rebuffed.
The hearing was chaired by Rep. Henry Waxman (D-CA), well-known for his aggressive oversight of public and private entities and activities that have a link to federal programs and spending. Waxman thanked Cooper for bringing the issue to the Committee's attention, saying "It's exactly the kind of issue the Oversight Committee should be looking at. And from what we've already found, this is an area in strong need of accountability."
The PEC witnesses described abuses at the coop, including its failure to allow customers to attend Board meetings; excessive salaries and other benefits to executives and Board members; failure to return capital credits and a closed election process for Board seats. Fed up, several members of the coop had sued PEC and state officials launched a criminal investigation.
Cooper cited other examples of problematic behavior, including a Georgia coop that has leased all its operations to a for-profit company secretly owned by coop officials; failure of small coops to merge to provide more cost efficient service to consumers and coops that receive more than 15% of their revenues from activities unrelated to power supply and delivery, which violates IRS rules that govern tax exempt status.
A significant number of other Members of the Committee participated in the hearing. Most spoke in positive terms about their experience with coops in their district and state, but also agreed that the problems at PEC, and the other concerns Cooper raised, were troubling and deserving of oversight.
The Oversight and Investigations Committee does not have authority to legislate, and there was little said at the hearing that suggested that Members would seek to impose new, federal regulatory authority on coops. Nevertheless, it is clear that Rep. Cooper is determined to pursue actively his quest to make coops more accountable, and he did not foreclose the possibility of legislation in the future.