Monthly Archives: September 2021

Of synagogues and subsidies

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A while back I was engaged in an online discussion with other solar advocates about renewable energy — specifically, how to get more of it built. Some of the participants I knew, others I did not. The conversation was lively, ranging from the need for better education to public policy and incentives.

But then one of the participants threw in an unexpected comment. His email read, “Aren’t we all tired of synagogues?”

The question stopped me cold. I had never heard anyone express weariness of synagogues, much less understood that to be a consensus sentiment. However, I’m not Jewish, so if it were something my Jewish friends grumbled about among themselves but did not share more widely, then I wouldn’t necessarily know about it.

But our discussion was about renewable energy, so surely the comment could not really be about a physical house of worship. “Synagogue” had to be shorthand for something else. If someone said “aren’t we all tired of church,” it might be understood to refer to doctrinal thinking, or more likely, to preaching. You could see how someone would be tired of renewable energy advocates preaching about the benefits of wind turbines and solar panels. Could “synagogue” be meant as a sort of metaphor for haranguing people?

It seemed like a stretch, even assuming the person who had made the comment was Jewish, which I didn’t know. I looked back at the email to see if the name might give me a clue. At that moment, another email came through from him: “Sorry about that autocorrect, it was supposed to be ‘subsidies.’”

Ah.

I was relieved that synagogue fatigue was off the table, but now I had a new question to ponder: Are we, in fact, all tired of subsidies?

Opposition to subsidies is one of the touchstones of free-market capitalism, and even within the wind and solar industries you will find believers in the proposition that if a technology can’t attract enough customers on its own merits, it deserves to remain niche, and the government ought not to put its fat thumb on the scale.

Republican attacks on the Virginia Clean Economy Act, passed last year by the Democrat-controlled General Assembly, are often framed as opposition to the government “picking winners and losers.” The law certainly does that, by directing utilities to close coal plants and incorporate an increasing percentage of electricity from wind and solar.

Some Republicans are raising the same objection in response to the Biden administration’s plans for addressing the climate crisis. Technological advances and market forces are already moving us inexorably towards a clean energy economy—but not fast enough. So Biden’s initiatives rely on the full range of government powers, subsidies among them, to drive down greenhouse gas emissions nationwide in an effort to avoid a worldwide climate catastrophe.

But here’s the thing: to the extent the U.S. has anything resembling an energy policy, subsidies have always been a tool of first resort. Indeed, this has been the case literally since the nation’s founding. Often the difference between Republicans and Democrats is not in whether they embrace subsidies, but which ones they favor.

Cash grants, tax credits, loan guarantees, low-cost access to public land, public purchasing requirements, protective tariffs and federal R&D funding all shape the way energy is produced, delivered and consumed, and they are responsible for the fossil-fuel heavy energy economy we have today. Even U.S. foreign policy and our military have been deployed for the benefit of extractive industries. A century ago, the National Guard came to the aid of the coal barons against striking miners. More recently, a think tank crunched numbers to estimate the U.S. spends $81 billion per year to  protect global oil supplies. That figure rises to over $3 trillion when you count the Iraq war.

Externalities matter, too. If an industry is allowed to inflict damage to a community’s air and water, that is a form of subsidy that can be partly measured in dollars spent on health care and clean-up. Regulations requiring expensive pollution controls can lessen the economic advantages of offloading costs onto the public, but any remaining costs shouldered by the public are a subsidy to the polluter.

Conversely, by displacing fossil fuels, a clean energy facility may confer a public benefit far exceeding the cost of any government subsidy it receives. When we’re dealing with climate change, the public benefit of carbon-free energy is immense.

None of this is an argument against the merits of free market competition, which remains the economy’s most important driver of innovation leading to better and cleaner energy technologies. Well-designed subsidies should work with the market, not against it, to speed the energy transition towards a net-zero future.

And to that we should all say, Amen.

This article originally appeared in the Virginia Mercury on September 14, 2021.

You call that democracy? How Virginia’s electric co-ops fail their member-owners.

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Virginia’s thirteen electric cooperatives were exempted from most provisions of the 2020 Virginia Clean Economy Act, which caps carbon pollution from power plants and requires investor-owned utilities to meet renewable-energy and energy-efficiency targets. In lobbying for the VCEA exemption, cooperatives no doubt touted their claimed status as member-owned and democratically governed. In theory that means co-op members can direct their co-ops to adopt programs friendly to consumers and the environment. But events last month showed again that some of the commonwealth’s electric co-ops are not as democratic as they claim. 

Summer is annual-meeting time for electric co-ops. Like all consumer cooperatives, electric co-ops are owned by their customers (called “member-owners”). Democratic control of the cooperative is one of seven “cooperative principles” that all electric cooperatives claim to adhere to. The key to genuine democratic control is board-of-director elections, which happen at each co-op’s annual meeting, where member-owners vote for board candidates. 

Two examples from Virginia electric co-op annual meetings last month demonstrate ways large and small in which incumbent co-op boards game the election process to help their favored board candidates. The most egregious case occurred at Rappahannock Electric Cooperative (REC), which serves rural and suburban Virginians in 22 counties. In a five-way race in REC’s August board election there was a clear winner among co-op member-owners who selected a candidate. Hanover County businessman Roddy Mitchell got more than twice as many member-owner votes as any of the four other candidates. You might call that a landslide win.

But through REC’s needlessly arcane and confusing proxy-voting process, REC’s board was able to allocate some 6,000 additional votes to the board-favored candidate, thereby swinging the election win to him. That board-favored candidate came in fourth out of five when looking at votes that member-owners cast for candidates.

When a board controls 40 to 60 percent or more of all votes, as REC’s board generally does, the board effectively controls the election outcome and “democracy” is an empty label.  

REC’s board controls huge numbers of votes each year because proxy ballots left blank are deemed by REC’s board as a delegation of the member-owner’s vote to the incumbent board to decide whom to cast them for. Moreover, REC offers those who send in a proxy, even a blank one, a chance to win cash prizes. That encourages member-owners to submit blank proxies, even if they have no interest in the election or makeup of the board. REC election tally forms going back over a decade show that every year REC’s incumbent board controls enough proxies to control election outcomes. For at least the past twelve years no candidate has won a race without getting the board-controlled votes. 

So the way to win an REC board election is to please incumbent board members, not to get the most votes from member-owners. That isn’t fair and it isn’t democratic. It leads to board groupthink, insulates boards from the concerns of member-owners, and discourages well-informed, knowledgeable co-op members from running for board.

A National Rural Electric Cooperative Association governance task force report recommended against using board-controlled proxies to swing election results. But REC’s board continues to ignore that recommendation years after it was made.  

Meanwhile, neighboring Shenandoah Valley Electric Cooperative’s (SVEC) board changed the co-op’s bylaws at a closed board meeting in June to help out an incumbent board member facing a strong challenge from another candidate in the August election. The board added a bylaw provision saying that in the case of a tie between an incumbent and non-incumbent candidate the incumbent would be deemed the winner of a one-year board term! 

As if that isn’t bad enough, REC board chair Chris Shipe said publicly a few weeks ago that SVEC’s board is considering changing its (fair) direct election process next year to a proxy system like REC’s. If SVEC follows through on that, then its board, like REC’s, will be able to determine election outcomes. That would make SVEC’s new tie-vote bylaw unnecessary. There are no ties when incumbent board members control election outcomes. 

SVEC’s board would then be fully insulated from member-owner concerns. That would greatly help incumbent board members, who recently approved major fixed-monthly-charge increases that disproportionately affect the co-op’s low-income member-owners and those who’ve invested in rooftop solar or energy efficiency.

There is currently no government oversight of Virginia electric co-op elections, and no law to ensure fair board-election procedures, prohibit abusive proxy practices, or prohibit using board-imposed bylaw changes to favor incumbents. This is important because electric cooperatives are essential service providers that operate as monopolies. Monopoly utilities seldom act in the best interest of their customers unless subjected to meaningful scrutiny, accountability, and independent oversight. Such oversight is lacking when entrenched co-op boards have ironclad control of board-election outcomes. It’s time for the General Assembly to step in and ensure basic, fair election practices to give Virginia electric cooperative member-owners a true say in the governance of the utilities they own.

Seth Heald is a retired U.S. Justice Department lawyer and has a master of science degree in energy policy and climate. He is a member-owner of Rappahannock Electric Cooperative and co-founder of Repower REC, a campaign to bring genuine democracy to Virginia’s electric co-ops. More information at RepowerREC.com.