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Insurance ban needed in proposed coop rules

The spirit of the law backs efforts by the Louisiana Public Service Commission to place significant limits on directors of electric cooperatives, including the prohibition of coop-paid insurance.

Last year, controversy erupted over reports that many directors received large emoluments from coops. The entities provide electricity under a membership model as Internal Revenue Service 501(c)12 organizations, meaning they must operate as nonprofits in order to secure tax-free status and directors serve part-time.

Originally, the federal government launched the coop concept in 1935 through presidential executive order. At the time, while most urban households had electricity, few did in rural areas due to expense. The U.S. government hoped that states would pass legislation establishing a framework for organizations with low overhead that could make power affordable to member/owners.

Louisiana, as did 30 of the 47 states with these, passed a special law to regulate them, which prohibits a salary for directors, who members periodically choose. However, the law does allow as part of costs payment of benefits, specifically mentioning fees for meeting attendance. More detailed supervision comes from regulations issued by the PSC.

Howwver, a review of recent IRS Form 990 filings, as well as documents released by the 11 coops operating in the state, showed some directors receiving compensation that, in a few instances, exceeded the states average personal income, in excess of $50,000 annually. This realization spurred the PSC into formulating new regulations governing directors and their compensation.

The panel has reached consensus on a couple of matters. It intends to regulate the per diem to directors, at no more than $200 a meeting, as well as to impose term limits on their service.

But debate continues over whether coops can offer life and health insurance. The latter cost members $2.5 million statewide in 2017. Some commissioners argue that coops, through members exercising democracy (either by electing directors or using an initiative process under law) should determine whether directors enjoy this, while others favor an outright ban.

In this argument, the intention behind coops and Louisiana law about these point the way to resolution. Presumably, coops exist because of higher fixed costs and legally follow a nonprofit model precisely to hold down costs. Thus, to have members pay for insurance – something which has nothing to do with their duties as directors – for a handful of volunteers contradicts this vision. Further, the law does not mention anything but per diems as a noncompulsory form of compensation.

An expense paid for meeting attendance adequately compensates for a few hours of work a month. Anything more violates the spirit behind the founding and existence of coops. The PSC should proscribe members paying for directors’ insurance, and if a coop’s membership feels differently, they either can ask the Legislature to amend the law to permit the practice, or they can petition to remove it from PSC oversight as allowed by law.

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