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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