The dog that didn’t bark: the case of the missing electric co-op members.

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Photo by Seth Heald

 

Readers of Rappahannock Electric Cooperative’s monthly magazine, Cooperative Living, found a surprise when the magazine’s May 2020 issue arrived. The surprise wasn’t what was in the magazine, but what was missing, calling to mind Sherlock Holmes’s key insight in Arthur Conan Doyle’s story The Adventure of Silver Blaze, featuring a dog that didn’t bark. As Holmes explained to a Scotland Yard detective, sometimes what didn’t happen is as significant as what did.

In an annual tradition going back at least a decade and likely much longer, REC each May publishes in its member magazine a list of co-op members or former members whom REC owes money to but has lost track of. The list usually takes up around two full pages, with perhaps 500 to 800 names listed in small print. Readers are encouraged to look for their own names as well as names of others, and to notify REC if they have information about how to find these missing people. The funds in question are “retired capital credits,” a/k/a “patronage capital,” meaning money belonging to the co-op member-owners that has been invested in the co-op for a time and can now be returned. (As a cooperative, REC is owned by its customers, who are called “member-owners” or just “members.”)

But this year, instead of listing the names in its magazine, REC advised readers they could view the list online. The magazine gave no explanation why REC had changed its longstanding annual practice of publishing the list in the magazine, which is mailed to all of REC’s roughly 140,000 member-owners, some of whom don’t have internet service.

So, wondering why REC had changed its publication practice, I took a look at the list online and discovered that it was 74 pages long, with about 21,000 names.

One mystery solved. Others arise.

One mystery was solved. No wonder REC didn’t print the list in Cooperative Living—doing so would have taken up nearly two entire monthly issues of the 40-page magazine. But additional mysteries arose:

  • Why is the list so long this year (37 times longer than in most years)?
  • How does an electric co-op with around 140,000 members lose track of 21,000 members or former members?
  • Why didn’t REC explain in its magazine why this year’s list is so huge?
  • And is REC’s board at all concerned about a system that retains people’s money for such a long time that 21,000 of them can’t be located when it’s time to return the funds?

I checked with REC and learned that this year’s list of lost REC members is long because in 2017 REC’s power supplier, Old Dominion Electric Cooperative (ODEC), returned patronage capital (a/k/a capital credits) to its member owners, including REC. ODEC had originally obtained that patronage capital from margins (excess annual revenues) that ODEC received decades ago—in the 1980s and apparently even earlier.

REC’s practice for patronage capital it receives back from ODEC is to pass the funds through to REC’s members who bought electricity from REC during the years in which ODEC originally collected the patronage capital. REC said it waits three years after receiving the funds from ODEC before concluding that a former member cannot be located, and then publishes the list of those missing.

I looked at ODEC’s 2017 annual report and learned that in December 2016 its board of directors “declared a patronage capital retirement of $5.8 million, to be paid on April 3, 2017.” REC is the largest member-owner of ODEC, so REC received a good portion of that $5.8 million capital-credit retirement in 2017.

Of course, many of REC’s member-owners from over 30 years ago are no longer around. And that explains why REC can’t find some 21,000 of its former member owners—many of them are long since dead, and others moved away.

Perhaps some REC members will check the 21,000-name list and recognize a name or two, but it seems likely that most of those 21,000 people or their heirs won’t be found. One REC member who checked the list saw her deceased father’s name on it. He moved away from Virginia decades ago and then died in 2013. When the daughter contacted REC, the co-op sent her a letter explaining the cumbersome steps she will have to follow to collect the several hundred dollars owed to her father’s estate.

ODEC financial statements show that ODEC paid additional capital credits to its member-owners in years after 2017: $14.1 million in 2018 and $4.3 million in 2020. That 2018 payment is nearly three times the 2017 amount, meaning that when REC publishes next year’s list of lost members, which may be as long as this year’s, the amounts involved will be substantially greater. This is important, because some people recognizing names of deceased relatives on this year’s list might conclude that the amount they can get from REC now is not worth the considerable trouble it could take to gather the documentation needed to make a claim to REC.  But their calculus on that might change if they know that next year there might be nearly triple as much available. And if they gather and submit the paperwork this year, they won’t have to repeat that process next year.

The theory of cooperative ownership of an electric utility is that member-owners, who are the business’s customers, invest some of their funds in the business as capital, in order to keep the costs of goods sold (electricity) low. That’s why electric co-ops retain excess annual revenues (called “margins”) for a time and then later pay them back to members as retired capital credits, if conditions allow. (More on that here.)  But is that business model really working when a cooperative holds on to the funds for so many decades that a significant number of the member-owners whose funds were retained can no longer be found? One would hope that’s an issue REC’s board members find concerning, but we don’t know what REC’s board thinks because it operates in complete secrecy when setting REC’s capital-credit policies.

For the past two years, the Repower REC reform campaign has urged REC’s board to be fully transparent about the co-op’s capital credit policies, but the board has resisted. REC doesn’t even tell its members what their accrued total capital credit balance is unless the members know enough to ask for that information. Repower REC urged REC to disclose that basic information at least once a year on each member’s bill, but the co-op hasn’t done it.

Lack of transparency discourages democratic participation.

By not fully informing REC member-owners about the details of their co-op’s (and its power supplier’s) capital credit practices, REC’s board indirectly discourages member-owner participation in the democratic governance of the co-op. For if more member-owners understood the details of how capital credits are supposed to work, and how they actually work in practice at REC, then more co-op members would be motivated to demand that board members address a situation where tens of thousands of co-op members (or their heirs) may be losing the funds they invested in the co-op decades ago.

According to the National Rural Electric Cooperative Association, “the return of [co-op members’] investment through the allocation and retirement of capital credits is one of the concepts that defines a cooperative and distinguishes it from another form of business.” To remain relevant as a legitimate form of business ownership for a monopoly utility, REC, ODEC, and other electric co-ops need to step up their game when it comes to transparency about capital credit practices and ensuring that patronage capital is actually returned to co-op members in a fair and timely manner.

When a 140,000-member Virginia electric cooperative can’t find 21,000 of its members or former members to return their investments, something is wrong.

Seth Heald is a member-owner of Rappahannock Electric Cooperative and co-founder of the Repower REC campaign.

 

 

 

 

 

 

 

 

Release of secret NRECA governance report supports Virginia electric co-op reform groups’ efforts to restore democracy at their utilities

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An energy watchdog group’s release last week of a formerly secret 2018 report from the National Rural Electric Cooperative Association (NRECA) reveals that NRECA’s governance task force supports reforms that Virginia electric co-op boards are fiercely resisting. The two key reforms, sought at Rappahannock Electric Cooperative (REC) by the Repower REC reform campaign, would help to ensure fair board elections and more transparent governance. Electric co-ops are owned by their customers, who in fact are not called “customers,” but rather “member-owners.” The heretofore secret NRECA governance report was disclosed last week by the Energy and Policy Institute.

Arlington, Va.-based NRECA is the powerful group that lobbies for some 900 rural electric co-ops across the country, and also provides training to board members of those co-ops. In the past 15 years serious governance problems came to light at a number of electric co-ops—some rising to the level of outright scandal, as documented in a 2008 congressional hearing. While some rural electric co-ops implemented reforms in response to the scandals, others have resisted. At some co-ops, board positions are tantamount to sinecures, with well-paid board members staying on for many decades or life, their positions sometimes handed down to friends, relatives, or other insiders. Democratic control is sometimes more an appearance than reality.

Two member-owner groups are currently seeking reforms at rural electric co-ops at opposite ends of the commonwealth. PVEC Member Voices seeks reforms at Powell Valley Electric Co-op, in far Southwest Virginia, while the Repower REC campaign (of which I am a co-founder) seeks changes at REC, which stretches from West Virginia almost to the Chesapeake Bay. With 139,000 member owners, Fredericksburg-based REC is one of the largest electric co-ops in the nation, and the third largest electric utility in Virginia.

Repower REC has urged REC’s board to fix the co-op’s unfair blank proxy election practice, which allows REC’s board, rather than co-op members, to determine board-election outcomes. This is not an academic or theoretical issue at REC—board-controlled blank proxies change actual election outcomes.

Three times in the past four years the board’s control of several thousand blank proxies altered election results, allowing a board-favored candidate to prevail over the candidate who received the most direct member-owner votes. Just last August, Dr. John Manzari—a  board candidate seeking reforms of REC’s governance, rooftop solar, and broadband policies—received the majority of votes cast directly by member-owners.

But Manzari still lost the election because the board cast more than 2,000 blank proxy votes for his opponent–the incumbent. Although nothing in REC bylaws requires or specifically authorizes the practice, REC’s board treats blank “member-undesignated” proxies as delegating the member-owner’s vote to the board to cast as it sees fit.

Disturbingly, many of these blank proxies are solicited and collected by REC employees at the co-op’s offices when members come in to pay a bill in cash or resolve a payment issue. REC employees talk up the valuable prizes co-op members can have a chance to win by just signing the form, say that it’s okay to leave the form blank, and insist that the form be returned on the spot to the REC employee, rather than mailed directly to the independent election administrator, as announced election procedures require.

This REC vote-solicitation and collection practice, which prevents members from informing themselves about candidates and encourages signed but otherwise blank proxies, is the primary way incumbent REC board members game the system to allow their favored candidates (usually themselves) to stay on in their well-paid positions for decades. (REC board members in recent years have been paid around $30,000 to $48,950. Each director’s total pay depends on how many official REC meetings or events he or she attends.)

In 2017 NRECA publicly announced a 20-member task force appointed to examine governance issues at electric co-ops, and noted the importance of ensuring democratic member control. Two of the task force members were leaders at Virginia co-ops: John Hewa, a vice president at REC, and Brenda Hicks Johnson, a director at Southside Electric Co-op. NRECA’s Governance Task Force completed its work and issued a report in early 2018.

Despite the public announcement of the task force, NRECA kept its report secret, available only to senior co-op managers and co-op board members. The report was thus not available (until EPI published it last week) to the tens of millions of U.S. rural electric co-op member-owners most directly harmed by undemocratic co-op practices and poor governance at their co-ops.

NRECA’s Governance Task Force, we now know, recommended against board-election practices that give large numbers of proxy votes to incumbent boards, allowing them to control board-election outcomes. The task force reasoned that giving boards large numbers of blank proxies “may give the perception that the board controls or improperly influences director elections.” At REC that’s not just a perception—it’s the reality. REC’s board effectively controls every board election and has done so for at least a decade, and likely longer.

NRECA’s governance report also addresses a second Repower REC position. Repower REC has urged REC to open its board meetings for co-op member-owners to observe, as many electric co-ops around the country (but only one in Virginia) do. This is the only way member-owners can monitor the performance of individual board members, which of course is essential to casting informed votes in board elections. NRECA’s governance task force recommended this reform too, saying that opening co-op board meetings for co-op member-owners to observe could “facilitate transparency and openness, and strengthen the democratic nature of cooperatives.”

PVEC Voices also seeks open board meetings. At the reform group’s urging, PVEC’s board meetings were recently opened for co-op members to observe. PVEC Voices seeks to ensure this reform sticks by enshrining it in the co-op’s bylaws, but the co-op’s board took steps to keep the reform measure from coming to a member vote.

REC’s board and management have fiercely resisted efforts to change these two undemocratic practices (board control of election outcomes and secret board meetings) and refused to engage as a board in dialogue with Repower REC representatives about these issues. The board even refused to allow REC member-owners to vote on whether to reform the disputed election and board-meeting practices. That has led to litigation in the SCC and courts about the rights of Virginia co-op members to vote on such democratic reforms. The SCC earlier this year said it was not interested in resolving what it called an “internal management” issue, so the litigation moved to the courts and is now pending in the Spotsylvania County Circuit Court.

The NRECA governance report was available to all electric co-op board members and managers, so it’s reasonable to assume all REC board members and senior management have seen it and been aware of its recommendations since early 2018. REC did not disclose in the SCC proceeding that the reforms REC’s board opposes were recommended by the NRECA task force. REC was not under any legal obligation to do so, but the co-op’s claims to the SCC that the proposed reforms would somehow severely damage the co-op now ring especially hollow in light of what we have learned about the NRECA governance report.

The REC board’s absolute refusal to consider or discuss these issues in a dialogue with Repower REC is unjustifiable. Even more disturbing, REC’s board accused Repower REC’s co-founders of lacking “good faith” for even proposing the two democratic reforms. The board’s accusation was leveled in a letter sent several months after the 2018 NRECA governance report came out and was available to REC’s board.

It’s unclear why REC’s board has so strongly resisted common-sense, democratic reforms that would bring the co-op in line with best governance practices. It’s hard to avoid the conclusion that board members don’t want to compete on a level playing field in fair elections and don’t want their constituents to know what board members are doing.

We hear a lot about “energy democracy” these days. Virginia’s electric co-ops receive favorable tax and regulatory treatment based on the assumption that the co-ops are democratically controlled. The commonwealth’s regulators and law-enforcement agencies should be aware that democratic control cannot be assumed, but must instead be verified. Virginia legislators should also examine NRECA’s governance report and how the commonwealth’s electric co-ops sometimes fail to live up to their democratic principles. If Virginia’s electric co-ops persist in blocking basic democratic reforms, the General Assembly should enact measures to ensure that co-op democracy is a reality, not just a slogan.

Seth Heald is a member-owner of REC and a co-founder of the Repower REC Campaign. He is a retired U.S. Justice Department lawyer and also has a master of science degree in energy policy and climate.

 

 

SCC filing challenges Rappahannock Electric Cooperative’s effort to block member-proposed reforms

A filing with the State Corporation Commission last month shines some light on the workings of Virginia rural electric cooperatives, or at least one of them. It also raises an important question about this often-overlooked sector of the commonwealth’s electric distribution system. Electric co-ops are supposed to operate democratically, but do they really? And what happens when they don’t?

Three longtime member-owners of Rappahannock Electric Cooperative (REC), one of whom is me, filed the recent petition. The other two petitioners are Brigadier General John C. Levasseur (U.S. Army Reserves, Retired), and Dr. Michael F. Murphy. REC is one of the largest electric co-ops in the nation. General Levasseur served on REC’s board of directors for more than three years. I didn’t know these two fellow co-op members until last year. We’ve each traveled separate paths that led us to the same conclusion—democracy and transparency are too often practiced more in name than in substance at REC.

We found board practices and maneuvering designed to keep REC members from seeing how the board itself effectively controls board election outcomes. We found board practices that keep co-op members from learning enough about board members and prospective board candidates to make an informed decision when voting in board elections. And we’ve seen a board culture that favors a go-along-to-get-along attitude over asking tough questions of management and looking out for consumers. More details on how REC and its board thwart transparency and democracy are available on the Repower REC website.

Our SCC petition asks the commission to determine that REC’s board of directors is improperly blocking our effort to propose bylaw amendments for consideration by our fellow co-op members. Virginia law and REC’s bylaws explicitly authorize individual co-op members to submit proposed bylaw amendments for a vote by the full co-op membership.

The three of us are co-founders of Repower REC, a campaign to promote genuine transparency and democracy at our co-op. Our three proposed bylaw amendments would require REC to

  •     annually disclose each of its nine board members’ total compensation;
  •     allow REC members to observe the co-op’s board meetings, in person or online; and
  •     make a clarifying change to the proxy ballot form REC uses for board elections.

REC’s lawyer Charles W. Payne Jr., writing on behalf of the co-op’s board, advised us that the board will not allow us to submit the proposed amendments for a membership vote. He said the proposed bylaw amendments were not made in good faith, and would violate REC’s bylaws. One wonders how a bylaw amendment, which after all is supposed to change the bylaws, could do anything but “violate” the existing bylaws. Payne didn’t explain the basis for his lack-of-good-faith allegation. Presumably these matters will be clarified as the SCC case proceeds.

In recent years a number of electric co-ops around the nation have faced challenges from co-op members seeking to address democracy and transparency issues. In some instances bylaws have been changed and entrenched co-op boards have been replaced as co-op members re-asserted their rights, re-established transparency and true democratic control, and in many cases uncovered the mismanagement of cooperative resources. Often the old board members had served for many decades without real accountability to co-op members. Three people have been on REC’s board for 20 years or more, and two of those three have been on for well over 30 years. Last year two other REC board members died in office, having been on the board for 35 and 40 years.

The essence of the cooperative form of business is democratic control, with fair elections and meaningful member-owner participation in governance. REC acknowledges this principle on its website. The executive editor of REC’s member magazine Cooperative Living, Richard G. Johnstone, Jr., even advised REC members a few years ago that their “vote on changes or additions to bylaws that govern the utility they own” is perhaps one of the most important aspects of democratic control at an electric co-op. Johnstone should know. He is president and CEO of the Virginia, Maryland, and Delaware Association of Electric Cooperatives.

But in Virginia it’s not clear that any regulator or law-enforcement agency or the General Assembly regularly monitors electric co-ops to ensure that they’re living up to the requirement embodied in Virginia law and federal tax law that co-ops must operate democratically with fair elections. This despite the fact that electric co-ops have monopoly status and receive favorable regulatory, financial, and tax treatment based on the assumption that they are democratic.

A 2008 U.S. Senate hearing focused on undemocratic practices and serious mismanagement and corruption at rural electric co-ops, focusing in particular on Texas-based Pedernales Electric Cooperative, the nation’s largest. A Texas state legislator testified that “without transparency [at an electric co-op] there is no meaningful local control.” A second witness, a leader of the effort to reform the co-op, said “[t]ransparency and openness, combined with fair elections leading to reduced director tenure, could have prevented many of the abuses we suffered at Pedernales.”

There’s also an important role for the press in monitoring electric co-ops’ democracy, or lack thereof. At the U.S. Senate hearing a congressman cited the “outstanding reporting of Margaret Newkirk of the Atlanta Journal Constitution and of Claudia Grisales of the Austin American Statesman chronicling the abuses of Georgia and Texas co-ops.”

Yet here in Virginia only one of the many newspapers distributed in REC’s service territory has thus far reported on the REC board’s effort to block a member vote on the proposed bylaw amendments. That account is in the respected but tiny Rappahannock News, widely read in Rappahannock County, but not elsewhere in REC’s 22-county service area. To its credit, the new nonprofit online publication Virginia Mercury published Robert Zullo’s account of the SCC filing. But many media outlets that seemingly cover Dominion Energy’s every move often ignore the electric co-ops.

As the SCC matter proceeds, it will be interesting to see what arguments REC advances in support of its claim that proposed bylaw amendments somehow improperly “violate” existing bylaws, and the co-op board’s claim that amendments to improve transparency about board compensation, board meetings, and election ballots are made in bad faith.

Even more interesting to observe will be the SCC’s analysis of the matter, and whether state legislators and the press begin to pay attention to whether genuine democracy is practiced in Virginia’s electric co-ops. Those co-ops all love to extoll their supposed democratic governance when seeking favorable treatment in Richmond or Washington D.C. But not all rural electric co-ops live up to their high-minded principles.

Seth Heald has been an REC member-owner for ten years. He is a retired lawyer and has a master of science degree in energy policy and climate.

August 18, 2018 Update: This amazing story, published in Columbia South Carolina’s daily newspaper, The State, shows why electric co-op boards prefer to keep co-op members from knowing the details of board members’ generous compensation.

 

Electric Co-op Seeks to Double Fixed Access Charge in Move Against Solar

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A residential solar installation in REC’s rural territory.

In a little-noticed move earlier this year Rappahannock Electric Cooperative applied for a rate increase and restructuring that will make homeowner solar less attractive, and disproportionately affect many low-income customers in the process. REC, Virginia’s fourth largest electric utility, asked the State Corporation Commission to approve doubling the monthly access charge all residential customers must pay. The SCC hearing in the case is set for for October 31. REC’s move has received virtually no attention in the media despite its potential large impact on consumers and the commonwealth’s utility and solar industries.

A utility rate increase by itself might not be big news. What’s unusual is that the new revenues REC says it needs would come mostly from hefty access-charge increases for all residential and small-commercial customers. The access charge is the fixed monthly amount all consumers pay just for having a meter hookup, regardless of how little or how much electricity they consume. In what will surely be a shock to many low-income and low-consumption REC customers, the co-op’s residential access charge would double from $10 to $20 per month.

REC cites rising costs in delivering power as the reason for seeking more revenue. In a speech at the co-op’s annual meeting last August, REC president and CEO Kent Farmer claimed that the main reason for redesigning its rates so as to double access charges is that “[w]e’ve got a lot of customers who are installing solar panels.” But REC employee Matthew Faulconer acknowledged in the co-op’s SCC filing just last week that in fact only 0.3 percent of REC’s customers have thus far installed any form of distributed generation.

So REC’s move to restructure how it collects revenues appears to be an effort to stall the growth of future solar (and efficiency), rather than an attempt to solve any rate-design problem that the co-op currently has. REC’s low-usage customers, most of whom don’t have solar, will still see large increases in their monthly bills. They’ll be collateral damage in the co-op’s effort to slow solar growth. In his August speech REC’s Farmer emphasized that customers with average (not to mention higher) monthly electricity usage may not pay all that much more, since “by increasing that customer [access] charge we were able to reduce the kilowatt hour charge. So hopefully the net effect of what you will pay assuming the Commission approves our rate increase is just slightly more than what you are currently paying.” Yes, “hopefully,” that is assuming your monthly usage is average or above.

But of course, unlike children in Lake Wobegon, not all REC customers are above average. A good number of the co-op’s members obviously use less electricity than the average co-op member’s 1,283 kWh monthly consumption. And it’s a safe bet that a good number of those low-usage customers have lower incomes than those who consume more than average. Low-usage consumers will see a much bigger percentage jump in their bills.

In the co-op’s SCC filing last week REC’s Faulconer, with a (metaphorical) wave of the hand, dismissed the basic fairness issue this poses for the co-op’s low-income customers. He argues that in fact REC’s low-income customers tend to consume electricity in higher-than-average amounts. What makes REC think this is the case? Faulconer says “a good indicator of income level is whether a consumer qualifies for state administered fuel assistance, which includes income as an eligibility factor.” And, Faulconer explains, “the typical REC member receiving fuel assistance used an average of 1,323 kWh per month, 40 kWh higher than the current residential class monthly average.”

Implicit in Faulconer’s and REC’s reasoning is that customers receiving state fuel assistance are a good proxy for all low-income customers. But that proposition is absurd on its face. Surely it would come as a surprise to those low-income customers who keep their electricity consumption low to live within their means without government assistance, or who heat with wood to save money, or who cannot afford or don’t want air conditioning.

Certainly consumer groups aren’t buying the notion that access-charge hikes don’t harm low-income customers. The American Association of Retired Persons (AARP) has opposed rate-restructuring efforts like REC’s that increase fixed monthly charges. Joining AARP in fighting such increases are the NAACP, Consumers Union, and the National Consumer Law Center. All these groups point out that increasing fixed fees makes it harder for customers to control their monthly bills.

The fact is, REC’s proposed rate restructuring, if approved, would be a significant wealth transfer from low-consumption customers to higher-consuming members. To accomplish such a fundamental shift in an effort to stall solar growth is very much in line with the philosophy of Koch brothers-funded groups such as the American Legislative Exchange Council (ALEC), Americans For Prosperity, and similar organizations. (REC through its membership in the National Rural Electric Cooperative Association (NRECA) supports ALEC.) Even if REC isn’t coordinating directly with these groups, the co-op seems to have internalized their way of thinking about the need to fight homeowner solar so utilities can keep burning fossil fuel.

In a Sierra Club filing in REC’s rate case Melissa Whited of Synapse Energy Economics notes that the co-op could raise the additional revenues it needs without raising access charges and thereby disproportionately favoring one group of customers over another. Whited points out that REC’s proposal, by favoring those who consume more over those who consume less, gives inefficient price signals that promote waste in electricity consumption.

Utilities across the country, working with Koch-affiliated groups, have been fighting distributed solar by attempting to roll back renewable energy mandates and net metering laws. They’ve also been trying to raise fixed monthly access charges, although often being denied or scaled back by their regulators. In these efforts utilities rarely mention the significant benefits of distributed solar, and REC certainly didn’t, either in Farmer’s speech to co-op members, or in the utility’s SCC filing. REC this summer sent out a number of “beat the peak” messages, asking customers to cut back their usage on hot sunny afternoons to save the co-op from having to buy expensive power during those peak hours. But the co-op never acknowledges that its customers with solar are helping the co-op in a big way during those peak hours. It’s certainly easier to make a case for solar-discouraging rate restructuring if you ignore the benefits that solar brings to the co-op and its members.

REC may also be seeking a rate restructuring before the SCC now as a stalking horse for Dominion Energy Virginia, which is also an ALEC member and also rarely passes up an opportunity to slow distributed solar. In 2009 the General Assembly, in a subtle anti-solar maneuver that seems to have attracted little notice, passed legislation allowing Virginia electric cooperatives to increase access charges without SCC approval, provided the overall rate change is revenue neutral (such as when higher access charges are offset by reduced kWh rates). REC temporarily waived its right to skip SCC scrutiny for access-charge increases as part of its acquisition of customers from Allegheny Power in 2010, but that temporary waiver ends in two years. So REC could have delayed its access-charge restructuring until then and skipped SCC review for it. But going before the SCC now can give REC’s board and management some cover against angry customers, and also can help Dominion and other utilities by setting a precedent, if the SCC approves.

If the SCC staff analyzed how REC’s access-charge doubling will disproportionately affect low-income customers, it hasn’t disclosed its reasoning. In his prefiled testimony in the rate case, SCC principal utilities analyst Marc A. Tufaro simply said: “Staff is generally not opposed to the proposed increases in the Access Charges by REC.”

Virginia Attorney General Mark Herring is also a party in the case, through the Office of Consumer Counsel. That office has yet to publicly reveal its position concerning the access charge.

Seth Heald is a member of REC. He received an MS degree in energy policy and climate this year and serves as chair of the Sierra Club Virginia Chapter.

UPDATE: November 1, 2017: 

The Sierra Club announced today that it and the other parties to the REC rate case reached a settlement, pending final SCC approval.  The settlement reduces the overall revenue increase from $22.2 million to $18 million and scales back the residential access-charge increase from 100% to 40%. “This settlement is a significant win for REC’s member-owners because doubling their fixed access charges would have disproportionately harmed members who have invested in clean energy and energy efficiency,” said Kate Addleson, Director of Sierra Club’s Virginia Chapter. “REC’s proposal also would have harmed many low-income customers who try to reduce their energy consumption to keep their bills affordable, and would have discouraged co-op members  from investing in energy efficiency and rooftop solar in the future.”

As part of the settlement, REC also agreed to work with the Sierra Club to implement specific methods and procedures to provide co-op members advance notice and an opportunity to provide in-person and written comments to REC’s board before access charges can be increased in the future.

 

 

UVA Prof. Vivian Thomson’s “Climate Of Capitulation” is Essential Reading In This Election Year

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When University of Virginia environmental science professor Vivian E. Thomson researched and wrote her thoughtful account of environmental battles during her years on Virginia’s Air Pollution Control Board (2002 to 2010), she could not have known how fortuitously timed her book’s eventual publication would be. But as luck would have it, the just-published Climate of Capitulation: An Insider’s Account of State Power in a Coal Nation (MIT Press) comes out at a particularly opportune moment.

Donald Trump’s election, and his administration’s efforts to dismantle federal climate and environmental protections, means the states have a more important role to play than ever before as the U.S. tries to address the climate crisis. A primary theme in Thomson’s book is the outsized power of the commonwealth’s largest utility, Dominion Energy, over Virginia politicians and regulators. That is also fortuitous, since 2017 appears to be the year when, finally, Dominion’s unhealthy influence over Virginia politics could be a significant election issue. More than 50 candidates for the Virginia House of Delegates this year have pledged to refuse Dominion campaign contributions, as has gubernatorial candidate Tom Perriello. And Dominion’s proposed Atlantic Coast Pipeline for fracked gas is a significant issue in the Democratic gubernatorial primary.

Adding to Climate of Capitulation’s uncanny timeliness is Governor Terry McAuliffe’s executive directive this month requiring Virginia’s Department of Environmental Quality to draft proposed regulations to limit climate-disrupting carbon-dioxide emissions from electric-power plants. DEQ must submit its proposal to the state’s Air Pollution Control Board by December 31, just before McAuliffe’s term expires. Electric utilities and environmental groups will be watching that process closely, hoping to influence the final result. And of course the outcome of this year’s gubernatorial race will greatly affect the ultimate fate of McAullife’s effort to reduce carbon emissions.

Another main theme in Climate of Capitulation is DEQ’s lackluster environmental enforcement record over the years, and efforts by politicians of both major parties, including then-governor Tim Kaine, to rein in the Air Board’s efforts to strengthen environmental enforcement. Citing contemporaneous emails obtained from the Library of Virginia’s database, Thomson describes how the Kaine administration, DEQ director David Paylor, and state legislators worked to limit the Air Board’s effectiveness and expand it from five to seven members. According to Thomson, the size increase was specifically designed to weaken the power of the board’s three-member majority, which threatened to run afoul of business interests in pushing for pollution limits well within legal requirements, but significantly more stringent than what DEQ proposed to allow.

With DEQ and the Air Board likely to be in the spotlight for the rest of 2017 and beyond, Climate of Capitulation is must reading for Virginians concerned about climate change and carbon reduction.

Thomson notes that the part-time nature of Virginia’s legislature, combined with a chronically underfunded DEQ, deprives the state’s legislative and executive branches of the technical expertise needed to enforce complex air-pollution laws. As a result, Thomson argues, government officials too often end up relying for technical expertise on the large corporations that are regulated by those laws. The corporations, of course, are more than happy to oblige, and the result is predictable.

Perhaps the most provocative and insightful aspect of Thomson’s analysis is her description of what she calls “the third face of power.” The concept comes from the New York University sociologist Steven Lukes’s “three dimensions of power,” where the third, almost invisible dimension of power is the ability, in Thomson’s words, to shape people’s “perceptions over time without conscious knowledge.” She finds this third dimension of power in Virginia’s “traditionalistic political culture, which devalues public participation and civil servants,” “protects the status quo,” and too often favors corporate interests over citizens. This culture is encapsulated in an expression heard often in Richmond—“the Virginia Way,” although Thomson doesn’t use that term. The Virginia Way sometimes involves politicians in both major parties working to maintain the status quo, especially when that serves to favor large polluters. Thomson says “strong, sustained leadership” is needed to avoid capitulating to such a powerful, inertia-favoring force.

I wish Thomson had devoted more space to fleshing out this dimensions-of-power concept as applied to Virginia, for it seems key to understanding the commonwealth’s slow pace in deploying clean energy and addressing climate change. It further explains DEQ’s failure to take more aggressive, science-based positions that might conflict with powerful polluters’ interests. Inertia and the Virginia Way may not be bad in all situations. But inertia is not our friend in dealing with the climate crisis and multiple threats to clean air and water.

Vivian Thomson has done a great service in describing the sometimes-hidden influences that hinder enforcement of our environmental laws and slow efforts to address climate change. Virginia’s current political leaders, as well those hoping to replace them in this important election year, should read Climate of Capitulation. So should Virginia voters.

Seth Heald received a master of science degree in energy policy and climate from Johns Hopkins University this month. He is chair of the Sierra Club’s Virginia chapter.

 

Shareholder vote shows growing unease over Dominion’s role in climate change

Dominion 2017 Ped Bridge

Black curtains are visible inside the pedestrian bridge over Marshall Street leading to the Richmond Convention Center (background on the left). They were installed to block shareholders’ view of protesters lining the sidewalk outside Dominion Resources’ 2017 shareholder meeting last week. Photo credit: Chesapeake Climate Action Network.

A stunning development occurred during Dominion Resources’ annual shareholder meeting in Richmond last Wednesday. But as shareholders, board members, and company officials left the meeting, no one yet knew about it. What’s more, the Richmond Times-Dispatch’s coverage also missed it, focusing instead on the company’s name change to Dominion Energy. (To its credit, the Norfolk Virginian-Pilot did break the story two days later.) Dominion’s hometown newspaper didn’t just bury the lede; it overlooked it altogether. And therein lies an interesting tale.

What was so stunning? Simply this—some 48 percent of Dominion shares that were voted supported the resolution of a major shareholder, the New York State Common Retirement fund, calling on the company’s board of directors to report on how the company will deal in coming years with the fact that the world needs to reduce greenhouse-gas emissions to an extent consistent with limiting global warming to 2 degrees Celsius. The resolution’s full text is available on p. 60 of Dominion’s 2017 proxy statement.

Understanding why the vote on this resolution is stunning requires some context.

Shareholders have been submitting resolutions for at least eight years urging Dominion’s board to face up to global warming and the company’s role as a major carbon polluter contributing to that warming. In the past, some resolutions have gotten favorable votes as high as 24 percent, while others have been in single digits. Many large investors routinely follow the company board’s advice, and Dominion’s board always recommends a “no” vote on any environment- or climate-related resolution. Getting favorable votes is an uphill battle when a company’s powerful board is working against you.

That’s why the 48 percent vote for the retirement fund’s resolution this year is so huge. The total value of the nearly 198 million shares voting for the resolution was $15.5 billion, based on Dominion’s May 9 closing stock price.

“The vote by Dominion’s shareholders speaks volumes,” said New York State comptroller Thomas P. DiNapoli, trustee of the state’s retirement fund. “This is a wake-up call for the company to be responsive and explain how the Paris Agreement’s worldwide effort to rein in global warming will impact its business. Shareholders need to know what steps Dominion is prepared to take to address climate risk.”

But there’s still more to the tale. The stunning vote spike didn’t become known until hours after the meeting, and even then only to those who knew where to find the results and had a calculator handy to compute the vote percentages. That delay was no accident, but the result of Dominion’s efforts to keep the news from coming out during the meeting.

Until a few years ago, Dominion announced vote totals on shareholder resolutions during each meeting. That’s easy enough to do, since virtually all votes are cast in advance, and literally just a handful are cast on paper ballots collected during the meeting. But as favorable vote percentages on shareholder resolutions crept upwards over the years, Dominion discontinued the practice of announcing vote counts during the meeting. Instead it now reports only whether the resolutions got more than 50 percent of the vote. So this year it was simply announced during the meeting that the four shareholder resolutions on the ballot failed to get a majority of votes. End of story; nothing more to see here, folks.

By law, however, Dominion must report the actual shareholder vote totals to the Securities and Exchange Commission for public disclosure. It did so in the afternoon following the meeting, and put its SEC filing on the company’s website. Those who thought to look for them and knew where to look could find the vote results. Then, with a calculator or spreadsheet they could compute the vote percentages.

Dominion’s quiet move to prevent shareholders (and reporters) attending the meeting from learning the vote totals until later in the day is part of a pattern of subtle and not-so-subtle company efforts to tightly control messaging at its shareholder meetings. The control efforts have evolved each year as more shareholders have questioned the company’s environmental and climate record during meetings, and as demonstrators have begun to appear regularly outside to protest.

The company’s control effort reached somewhat absurd levels this year, as shareholders had to show their drivers’ licenses and admission tickets at four separate checkpoints before gaining entry to the meeting. As shareholders crossed an elevated pedestrian bridge across Marshall Street from the parking garage to the Richmond Convention Center, they found black curtains temporarily set up on floor stands to line the glass walls of the bridge, serving no purpose but to block any views of demonstrators on the street below. Then, when shareholders descended an escalator to the hallway outside the first-floor meeting room, they also found a long line of temporary stands of more black curtains. They were about eight feet high—just enough to block views through the wall of windows facing Marshall Street, where protesters had gathered on the sidewalk. This served to cast a bit of a funereal pall over the hallway, as shareholders drank coffee and ate Virginia ham biscuits before the meeting.

But enough about the voting process and window curtains. Understanding the true significance of the big vote spike for the retirement fund’s climate resolution requires a brief look at how Dominion addresses, and fails to address, the climate crisis. Dominion occasionally talks up its reductions in carbon intensity in electricity generation over the years. That’s the amount of carbon dioxide emitted per unit of electricity. And the company touts new solar projects, which are growing, but not nearly fast enough to catch up with Virginia’s neighboring states or to reduce carbon emissions on the needed timetable.

But Dominion has plans to increase its total carbon-dioxide emissions over the next fifteen years. And what the company never, ever does, is link its plans and its planned future greenhouse-gas emissions to what climate science tells us is needed to keep global warming to no more than 2 degrees Celsius. Indeed, as I wrote last year, Dominion executives studiously avoid even mentioning climate change in public, even when the topic is right in front of them, begging for attention. George Mason University climate-communication expert Edward Maibach and coauthors reported last year that silence on climate change can lead to more silence, in what they call a “climate spiral of silence.”

Meanwhile, while publicly silent about climate, Dominion still belongs to and supports the American Legislative Exchange Council (ALEC), which has a long track record of misinforming state legislators about climate science and working to block meaningful action to reduce greenhouse-gas emissions.

That’s why the 48 percent vote for the retirement fund’s resolution is so huge. Shareholders owning nearly half of the Dominion shares that were voted last week told the company’s board of directors and management that they need to start publicly talking and seriously thinking about climate change, and to explain how they will operate a business that is consistent with the need to keep global warming under 2 degrees.

Perhaps Dominion’s board believes, as at least one Dominion executive does, that climate change is an overblown issue that is pushed by “warmists,” that there’s been no global warming for fifteen years, and that global warming (which by the way isn’t happening) may not be human-caused. Such a belief would allow the board to ignore this shareholder vote, and assume that in future years the resolution will never get a majority vote because climate change concerns will go away as more people see climate change as a hoax. But maybe Dominion’s board, or at least a majority of its members, know better and will listen to the wake-up call delivered to them last week.

As I left the meeting I passed again by the black curtains in the convention hall windows and on the pedestrian bridge over Marshall Street. Just as Dominion used curtains to block views of protesters, its executives seemingly wear blinders to avoid looking at (and talking about) climate change. It’s past time for the blinders to come off and for Dominion’s management and board to look around at the wider world out there.

On May 22, Seth Heald will receive a master of science degree in energy policy and climate from Johns Hopkins University. His final paper in the program was about climate silence and moral disengagement. He is a Dominion Energy shareholder, and chair of the Sierra Club’s Virginia Chapter.

Sen. Mark Warner’s tolerance of climate disinformation

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CREDIT: VIRGINIA STUDENT ENVIRONMENTAL ASSOCIATION

 

Virginia’s senior U.S. Senator Mark Warner cast a vote this week that will come back to haunt him in coming years. It will also haunt our commonwealth and nation in future decades and centuries. Warner voted to confirm President Donald Trump’s nominee, former ExxonMobil CEO Rex Tillerson, to be Secretary of State.

Tillerson, sad to say, may not be the most extreme or unqualified of President Trump’s cabinet nominees. One can hope that Senator Warner will vote against some of the worst of the worst, such as climate-science denier Scott Pruitt to head the Environmental Protection Agency. Pruitt has pledged to unravel bedrock environmental protections like the Clean Air and Clean Water Acts.

But opposing one or two other Trump nominees won’t excuse Senator Warner’s vote to make Rex Tillerson Secretary of State.

Tillerson’s former company has spent millions of dollars over recent decades to promote climate-science denial, to the detriment of many millions of vulnerable people all over the world, including many here in Virginia. ExxonMobil’s climate-denial promotion has been documented in academic studies, and Virginia Attorney General Mark Herring is investigating ExxonMobil’s role in promoting climate-science disinformation.

To his credit, Virginia’s junior U.S. Senator, Tim Kaine, brought out Tillerson’s connection to climate-science denial at Tillerson’s confirmation hearing. Tillerson dodged Kaine’s questions. Following the hearing Kaine tweeted: “It’s shameful Tillerson refused to answer my questions on his company’s role in funding phony climate science.” Kaine voted against confirming Tillerson.

By all accounts Tillerson has personal virtues. He’s an Eagle Scout who long supported and recently headed the Boy Scouts of America. He was once a good juror in a criminal case, as one of his fellow jurors recently explained in The Dallas Morning News. In many respects Tillerson is an upstanding Christian who contributes to mission work to help others.

But his former company’s longtime, immoral promotion of climate-science disinformation will harm exponentially far more people than his personal good deeds have helped.

There’s a term to explain how people like Tillerson can be good Boy Scouts, jurors, and churchgoers while also doing great harm that will cause great suffering to others. It’s called “moral disengagement.” The concept is explained in detail in a recent book by emeritus Stanford psychology professor Albert Bandura, titled Moral Disengagement: How People Do Harm and Live with Themselves. Bandura describes several mechanisms by which corporate polluters try to distance themselves from the harm they cause. They use front groups to do their dirty work with politicians. ExxonMobil and other fossil-fuel companies do that through groups like the notorious American Legislative Exchange Council (ALEC), which promotes science misinformation to state legislators.

And Bandura notes that corporate polluters themselves promote scientific disinformation as a mechanism of moral disengagement. That is precisely what ExxonMobil has been doing for years, as Senator Kaine noted at Tillerson’s confirmation hearing. These lies and half-truths have real consequences for real people, here in Virginia and around the world.

Penn State climate scientist Michael Mann (formerly of UVA) has said that history will judge harshly those who promote climate-science denial. But, Mann added, “history will be too late.”

Senator Warner hasn’t himself promoted climate-science denial, but he just voted to make someone who has our nation’s Secretary of State.

History, and (one can hope) Virginia voters as well, will judge Mark Warner harshly for that.

Seth Heald is chair of the Sierra Club’s Virginia Chapter. He expects to receive a Master of Science degree in Energy Policy and Climate from Johns Hopkins University in May, 2017. His article on climate change and moral disengagement was published in the May-June, 2016 issue of Environment: The Journal of Sustainable Development.