The IREA's lack of Transparency and Disclosure

Electrical cooperatives and the Rural Electrification Administration (REA) were launched by President Franklin D. Roosevelt in 1935. They are one the country's greatest New Deal success stories. At the time private and investor owned utilities were not willing to take the risk to extend electrical service to rural areas and millions of American communities, farms, and ranches were without any source of electrical power.

The first rural cooperative organizations were humble affairs, housed in main street store-fronts and lightly staffed. By 1938 the typical electrical cooperative had about 800 consumer-members with democratically elected directors to manage the affairs of the organization. These early coops were “first name” neighborly affairs and about as formal as your local grange. In many cases, members were on the honor system, read their own meters and paid their bills face-to-face at the local Coop office. A typical “staff” might consist of a manager, a bookkeeper, a line foreman and a single crew. Local ranchers and farmers worked side-by-side with coop crews digging holes and "planting" power poles. Rural electrical power growth was explosive, and by the 1940's REA cooperatives delivered power to over 97% of America's farms and ranches and politically banded together under the umbrella of the National Rural Electric Cooperative Association. As the country grew, the demographics of many cooperatives would change from rural to suburban and the original small farm/ranch, grassroots, community culture of coops would resemble something completely different. Coop's near growing urban center would build large corporate headquarters and watch their sales grow into the hundreds of millions. In 1987 and 1993, first president Reagan and then President Clinton attempted to dismantle the REA structure of federal subsidies, but the cooperative “political footprint” had grown too large and powerful. Today cooperatives are largely resellers of electricity they buy from investor owned and municipal utilities at wholesale and resell to their members at retail.

The typical larger Coop member today is a suburban household with little time for the responsibilities of coop membership. Until my retirement, I would include myself in this same camp. Today's Coop members typically behave more like arms length customers and take little interest in the management of their Coop. In many Coops this passive indifference has led to a culture of "management and directors for life" and a resulting sense of entitlement where long entrenched management and boards of directors have come to believe that it is "their" Coop and that Members should not meddle in any meaningful way with the operations and affairs of the Coop.

The current Coop non-profit organizational structure lacks the discipline of the market or a public utility commission to provide oversight and rein in management excess. Combine that lack of oversight with a captive and passive membership, and you have a perfect formula for unchecked power where a hand full of managers and directors control the levers of hundreds of millions of member dollars with a minimal amount of disclosure or transparency.

The IREA is controlled by eight men, the majority well into their 60's and 70's many of which whose service can be counted in decades. These men control approximately $200-million in annual revenue and as of the end of 2008, over $140-million in member capital account funds. This capital account is your money --- your equity in the Coop. The current directors and management provide only a token accounting of yearly operations and more importantly, almost no accounting of the annual and long term decisions regarding the management of the member capital account. You earn no interest on your capital account "investment" which is comprised of what you pay in excess of the actual cost of the electricity delivered to your home. And when you eventually receive your rebate (without any accounting) its original value is deeply discounted due to inflation. Between 2005 and 2008, these men more than doubled the long term debt of the Coop, from $275-million in 2005 to $644-million in 2008 [source: IREA forms 990 filed with the IRS]. This was done without member input and except for documents I gleaned from the internet, without member disclosure.

This story is typical of many electrical Coop's around this country. Short of a more active member participation in our Coop, this will not end well as a growing number of member lawsuits [see coop-litigation.com] against their own Coop's can attest.

If you want to become a more informed Coop member/owner I recommend this policy report titled, "Electrical Co-Operatives: From New Deal to Bad Deal?", published in the Harvard Journal on Legislation.

You can find it here:
http://www.harvardjol.com/wp-content/up ... Cooper.pdf

I have no idea what you post was about but I cashing my refund check from IREA today..

Mine was about 5% of my yearly total, or over one month of summer useage (100% electrical home), so I happy.

What both of you don't seem to realize is that those "refunds" are YOUR money. They come out of your capital account which is what you have paid over the years in excess of what your power actually costs. You're now getting it back without any accounting (Should the amount be 2 or 3 or 5 times higher? We just don't know) and discounted in real value by inflation. Wouldn't you like a complete accounting of the money in your capital account and how each rebate is determined, or do you think it is just coming to you as a result of the excellent governance of the IREA management and board?

I appreciate your posting Seneca, seriously. The problem as I see it is that most of us here on this forum are interested in larger picture problems. Your concern is most likely warranted. Don't get me wrong. Energy is a big issue, but I see other problems that warrant my attention.

Are you a candidate, by any means?

I know it's my money. That's why I called it a refund. All I know is I get one and my friends who use Xcel don't.

nmsys -- No I'm not a candidate, just a guy with a heightened BS detector who spent most of his career doing turnarounds and start ups in both the public and private sectors.

kresspin -- People don't get a refund from Xcel because they can't essentially tax you like a Coop. The IREA has to give that money back to keep their non-profit status and as of the end of 2008 they held over $140-million in member capital credits. As a member/owner wouldn't you like to see a complete accounting of that money?

seneca, have you contacted IREA regarding viewing the full accounting (much for Commanche 3)? As a member owned utility we may have the ability to view the records at the Sedalia headquarters. I don't really want them to print and send out something resembling the phone books.

Phone books? How about posting audited financial statement IRS Form 990's on line in pdf form?

Seneca:

I see the sense of posting Audited Financials. Have you asked them or proposed that to them?