Electric cooperatives say a crackdown by the General Assembly is not needed to clean up flaws that have led to abuse and corruption at the small utilities that supply 1.5 million South Carolinians.
Instead, the state’s co-op association this week unveiled to legislators a series of proposed reforms they say will keep South Carolina’s 20 co-ops from repeating a recent scandal at Tri-County Electric in St. Matthews.
The small utilities said they want a year to enact the transparency and election changes at their 2019 annual meetings. They don’t think the General Assembly needs to pass a new law requiring the reforms.
But some lawmakers are skeptical, contending a new law is the only way to ensure co-ops stay in line.
“If we don’t acknowledge some of the problems that potentially exist and try to correct them together, this won’t be the last time we have to deal with problems within the co-op system,” said state Rep. Russell Ott, a Calhoun Democrat who represents many of Tri-County’s 13,600 customers.
The proposed reforms come months after The State revealed in May that Tri-County’s part-time board members were enriching themselves at the expense of their customers, who own the co-op.
Later, in August, The State reported South Carolina’s 20 co-ops collectively had paid their boards double the national average, spent big on travel and national conferences, and given directors co-op-funded retirement and insurance plans.
The co-ops had left their customer-owners in the dark about utility business decisions and enacted rules that made it difficult for customers to challenge co-op directors, ensuring some board members held their seats for decades.
The stories prompted Tri-County Electric’s customers to vote out the co-op’s entire board in an unprecedented special meeting in August. The scandal also caught the attention of S.C. lawmakers and sparked internal reviews by other South Carolina co-ops.
“This has rocked electric cooperatives, the Tri-County experience,” Electric Cooperatives of South Carolina chief executive Mike Couick told a panel of state lawmakers Tuesday.
The co-ops formed a task force that recommended some of the same changes that lawmakers have suggested. However, the co-ops have not all agreed to address board pay or insurance policies — contentious issues that are important to co-op customers, who foot the bill.
Couick said Tuesday the co-ops will change their rules to ensure incumbent board members — who are elected to three-year terms — cannot influence their own elections.
The State reported in August that candidates challenging incumbent board members often must seek the approval of a co-op committee that nominates directors. But at 17 S.C. co-ops, the members of that nominating committee are picked by the sitting board, effectively allowing board members to control the election process.
“Incumbent trustees that are up for re-election ought not be in a position of influence over any of those processes,” Couick said.
Couick said co-ops also will end the practice of filling board vacancies with the relatives of directors. Co-op board members seldom leave their seats. But when they do, they have been replaced by direct relatives in at least four cases since the mid-2000s. Board vacancies should be filled by customers in elections, not the board, Couick said.
The co-ops say they also are committed to offering their customer-owners more time to vote in board elections, as well as opportunities for early voting. In May, long lines discouraged many customers from voting at Tri-County’s chaotic annual meeting. That co-op’s customers will elect nine new board members Saturday.
Finally, Couick said, co-ops will begin posting on their websites their meeting records and more details about board and executive pay for customers to review. The State reported in August that no co-ops live-streamed their board meetings or posted meeting minutes online.
All but four co-ops hold their monthly board meetings during working hours on weekdays — when working-class customers can’t attend. Several co-op CEOs told The State they never have seen a customer at a board meeting.
“If they’re going to be making decisions on rates ... there ought to be an opportunity for the (customers) to know this issue is coming up, for them to be able to request an opportunity to weigh in with their board, and ... see that the decision was made in a certain way,” Couick said.
The proposals mirror those filed this summer by Rep. Ott after the Tri-County scandal. But Ott and other lawmakers are wary of trusting the co-ops. If the changes aren’t written into state law, they say, the co-ops could revert to their old rules after the spotlight fades.
“The co-ops are to be applauded for taking these steps,” said state Rep. Gary Clary, R-Pickens. “But after what we dealt with with SCANA and now with what we’re anticipating coming up with Santee Cooper, I don’t have much trust for anyone in the utility business. ...
“We’ve allowed them (co-ops) to set up their own rules, and they’ve operated under them for 80-plus years, and look at what we have with Tri-County.”
But, in a tense portion of Tuesday’s hearing, Couick said “one-size-fits-all” legislation could be overbearing on 20 co-ops with differing election practices.
For example, Couick said, requiring Laurens Electric to offer more hours for its customers to vote on directors could force the co-op to open its polls at 4 a.m., since it typically wraps up voting about 10:30 a.m., before it gets too hot.
“If we do the right thing, I don’t see the legislation being necessary,” said David Wasson, Laurens Electric’s CEO.
Left alone, co-ops will do the right thing, Wasson said, noting his co-op voted last month to eliminate health insurance for new directors.
State Sen. Brad Hutto, an Orangeburg Democrat who also is employed as an attorney for the co-ops, agreed lawmakers should avoid a “top-down, heavy-handed legislative process.”
But Ott said his bill is necessary, not overbearing.
“I, personally, believe in the co-op model,” Ott said. “This truly is an attempt to protect it and save it. It’s not to hurt it. ... It’s to strengthen what you do and bring legitimacy to it so your members will have a higher degree of trust and faith in the system.”