Politics & Government

Scandal-scarred SC electric co-ops look to turn new leaf with new reform law

‘This is democracy in action:’ 1,000+ show up to fire Tri-County Electric’s board

More than 1,000 customers showed up Saturday morning for a vote on whether to fire Tri-County Electric Cooperative's board. Records showed the board members had spent thousands on committee meetings and bonuses.
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More than 1,000 customers showed up Saturday morning for a vote on whether to fire Tri-County Electric Cooperative's board. Records showed the board members had spent thousands on committee meetings and bonuses.

Last May, more than 2,100 customers of Tri-County Electric Cooperative flooded the utility’s annual leadership meeting to vote on whether to cut the part-time board members’ exorbitant pay and benefits.

After some members of the utility’s board waged a misinformation campaign against the cuts, the proposal was defeated by a narrow 30 votes. The chaos sparked an investigation by The State newspaper that revealed the board’s pay practices, prompted the entire board’s firing in a historic meeting later that summer, and raised questions about the practices of small electric co-ops across the Palmetto State.

On Friday, a year to the day later, Republican Gov. Henry McMaster was flanked by co-op leaders from across the state as he signed into law new transparency rules and state oversight for the little-known and scantly regulated power distributors.

“The electric co-ops, of course, are vitally important to the past and future of South Carolina,” McMaster said. “This legislation ... answers a lot of questions — accountability, openness, transparency — and it will make things better for everyone.”

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Tom Barton tbarton@thestate.com

Bill sponsor and state Rep. Russell Ott, D-Calhoun, said he believes cooperatives are the best model for electric distribution in the state.

“It’s the one that’s closest to the people. It’s the one whose leadership is elected by the customers (as opposed to shareholders),” Ott said. “And that’s way it should be. And, now, all we’ve done is take it a step further and made sure that those customers are going to have the information that they need, the transparency that they should have, to be able to ... make sure they are treated fairly.”

The bill’s signing marks the end of a turbulent chapter for South Carolina’s 20 electric co-ops that began with Tri-County’s annual meeting and the first stories detailing how the board was enriching itself on the backs of its 13,600 customers in six Midlands counties.

It also offers a political victory for the co-ops, who helped draft the bill and lobbied for it at the State House — in no small part to illustrate to lawmakers that the Tri-County scandal is an anomaly, not the norm.

“The bill signing is incredible affirmation that co-ops are committed to fixing issues that are of concern to their membership,” said Mike Couick, chief executives of the Electric Cooperatives of South Carolina, the co-ops’ statewide trade group.

Shockwaves

The Tri-County scandal and reforms have had a ripple effect at co-ops nationwide, Couick told The State.

He said he is on track to speak to a dozen state co-op associations about what happened and the reform movement it sparked. In March, he gave a presentation on the subject to packed audiences at the National Rural Electric Cooperative Association’s annual conference in Orlando.

“The interest level was so high they did a session in both the morning and the afternoon,” Couick said.

Stories about Tri-County offered a cautionary tale of what can happen when co-op leaders are free to spend huge sums of money without government oversight or transparency to their customer-owners.

Over the course of three months, The State revealed that Tri-County’s part-time board habitually scheduled scores of unnecessary meetings – many as brief as 15 minutes long – in order to claim a multitude of $450 per diem payments. Some of those board members claimed those $450-a-day payments for attending community events and political fundraisers with no relation to co-op business, and at least one filed reports that exaggerated the hours she worked.

The directors gave themselves health insurance benefits and $30,000 life insurance plans, ate expensive group dinners, claimed $300 Christmas bonuses normally reserved for employees, and paid themselves an $81,000-per-director retirement plan – all funded by the co-op’s unwitting customers.

While Tri-County’s customers paid some of the highest power bills in the state, their part-time board members took home about $52,000, on average, in 2016. Board chairman, Heath Hill, made $79,000 that year.

Employees complained certain board members pressured them into installing their power lines and doing landscaping work for free.

Because of lax and outdated transparency rules, the co-op’s 13,600 customers in Calhoun, Orangeburg, Richland, Lexington, Kershaw and Sumter counties had no way of knowing such details.

Change coming

Transparency problems are expected to improve when H. 3145 takes effect next year. The new law, proposed by state Rep. Russell Ott, a Democrat who represents many of Tri-County’s customers, empowers the state’s utility watchdog, the Office of Regulatory Staff, to investigate the co-ops. It also requires co-ops to publicly post their financial records online for their customers to review.

The idea is that co-op board members will behave if they know customers and a state agency are checking behind them.

The new law also requires co-ops to:

Notify their customer-owners of board meetings 10 days in advance and publish records of their meetings for customers to review. Before last year, that information was rarely available.

Prohibit S.C. co-op board members from filling board vacancies themselves. In the past, co-op boards have filled vacancies with friends and relatives.

Steer co-ops away from self-dealing by barring board members from having a business relationship — such as working as a contractor — with the utility they govern. The proposal also prohibits co-op directors from having the co-op hire their family members.

Make it easier for co-op customers to vote in board elections by holding early voting and requiring polling machines to stay open for at least four hours on voting day.

Prohibit board candidates from campaigning within a certain distance of a co-op’s annual meeting, when members are voting in board elections.

Tri-County’s leaders are happy to see the change.

“It’s a great day for Tri-County,” said that co-op’s chief executive, Chad Lowder, who pushed for policies capping board pay and was nearly fired in August during the former Tri-County board’s last-ditch effort to remain in power. “We’re in a good place with our new board. They like the new governance bill. It’s like the birth of a new co-op.”

Staff writer Tom Barton contributed to this story.

Avery G. Wilks is The State’s senior S.C. State House and politics reporter. He was named the 2018 S.C. Journalist of the Year by the South Carolina Press Association. He grew up in Chester, S.C., and graduated from the University of South Carolina’s top-ranked Honors College in 2015.
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