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The role of the nation's electric cooperative statewide associations.

INTRODUCTION

Frank had a problem. As the manager of the Rochester, Minnesota-based People's Cooperative Power Association (PCPA), Frank Welter had long contended with the Rochester Public Utilities taking chunks of the co-op's territory. In its history, PCPA lost some 10,000 acres and over 2000 members to the neighboring municipality. But this territorial intrusion was different and dangerous. The municipal utility used "quick-take" condemnation to acquire the co-op's significant airport load. Under quick take condemnation, the local courts decided compensation instead of the state's public utility commission. The Public Utilities Commission (PUC) is well-versed in valuing utility property. The local courts aren't. Millions of dollars rode on the right decision. Frank called the statewide.

THE STATEWIDE

Electric cooperatives are found in forty-six states. Texas is number one on the coop hit parade with 72 co-ops. West Virginia and New Jersey are among the states with only one co-op. The paucity of co-ops in some states explains why there are 38 statewide organizations. Of that number, four statewides are combined with a generation and transmission cooperative.

Scott Ridley, a co-author of Power Struggle - The Hundred Year War Over Electricity, said the National Rural Electric Cooperative Association (NRECA) was created, in part, to address the shortage of copper during World War II. By creating NRECA, the co-ops had a valuable voice to ensure the fledgling co-ops received a fair allocation of copper being horded by the nation's private power companies. The statewides, by comparison, were created to address legislative and political issues. Yet, as former Minnesota Rural Electric Association (MREA) President Harry Edmunds stated in 1950, "It is very difficult to draw the line between the services rendered by the national and our state association. The one complements the other."

The Indiana Statewide Association of Rural Electric Cooperatives was the first statewide established in 1935, predating NRECA's inception. If there is a universal statewide motto it's articulated by the South Dakota Rural Electric Association: "Your partner organization that does the things your cooperative doesn't have the time to do alone, the money to do alone or the power to do alone."

That "money" to fund statewide activities is decided by the member cooperatives. Some, like MREA, pay "dues," based equally on a member and kilowatt hour basis. Dues in Minnesota are capped at 10 percent to ensure no one system pays more than that. Other statewides like Mississippi and Iowa charge for services based on a subscription basis for the services provided, like loss control.

LOSS CONTROL SERVICES

Back to Frank's problem. Frank had other reasons to be steamed about the loss of PCPA's territory to RPU. The city-owned utility's use of quick-take condemnation had a cascading effect on the co-op's line personnel. Welter's line workers received extensive training from the Minnesota Rural Electric Association's Loss Control Department. The lines to be taken meant a disruption to the co-op's infrastructure. It also meant PCPA line workers had to toil over reintegrating the system. That meant less training time. Frank knew the statewide's loss control program saved lives.

That's why virtually every statewide offers loss control training. A bronze statute of a lineworker greets visitors to NRECA's headquarters. These men and women put the co-op's value on the line. It's not only dangerous work, it's highly technical. Loss control instructors visit with their respective line workers bi-monthly, if not more. Besides co-op visits, many statewides hold special workshops like hot line and underground schools and conduct apprentice programs.

Also providing invaluable loss control assistance is Federated Insurance, a cooperatively-owned insurance company, which insures the nation's electric co-ops. Federated provides financial assistance to the nation's loss control training efforts. Doing so has reduced injuries and worker's compensation claims. Besides ensuring safety, statewide loss control programs save their members hundreds of thousands of dollars in insurance costs.

LEGISLATIVE REPRESENTATION AND THE BOARD

Frank talked at length about quick-take condemnation with Lee Sundberg, MREA government relations director. Lee, a former Illinois Public Utility Commission senior staffer, was well-versed in territorial battles. Sundberg, who's represented MREA for 15 years, called statewide counsel Hap LeVander, perhaps the nation's foremost cooperative expert. Together they drafted a law prohibiting municipals the right to use quick take condemnation to acquire co-op territory. They too knew it would be a tough fight. The trade associations representing both the municipal-owned utilities and the League of Minnesota Cities would be furious opponents. Before engaging in that fight, Lee took the issue to the statewide board of directors.

Among the most difficult tasks confronting statewide boards is deciding legislative positions. The Edison Electric Institute (EEI), which represents the nation's private power companies, recently lost members who disagreed with EEI's opposition to retail deregulation (more on that later). The case opposing the use of quick take by municipal utilities was no different. Many MREA members had close working relations with neighboring municipals. They expressed concern that a high profile legislative effort to ban quick take could compromise their working relationships. Then there were G&Ts who sold power to some municipal utilities. Would the statewide's opposition to their customer's use of quick take condemnation compromise their wholesale contract? Choosing legislative sides invoked Newtonian physics: "For every action, there is an equal and opposite reaction." The statewide board hoped for good chemistry and not bad physics.

The Minnesota Rural Electric Association Board includes two directors from the state's six regions to represent MREA's 52 members. This district representation is not country-wide. For example, Oregon elects five directors by region. Oklahoma includes a manager and director from each co-op comprising a 56 member board. Nebraska, as is true with most statewides, counts a director from each rural electric system on its board.

Directors also exemplify the diversity from state to state. The Minnesota statewide president is Carl Potter, a former executive of International MultiFoods. Jean McKinney, past president of the Oregon Statewide, is a wheat farmer and a bank director. Paul Neil, past president of the Nebraska Statewide raises swine. Private power companies pick the directors for certain expertise. Statewide directors and presidents are selected for leadership. Our process makes the statewide a formidable legislative force.

The Minnesota statewide board discussed the bill with co-op representatives in their district. The measure was aired at district meetings and at the statewide annual meeting. After considerable input the statewide board endorsed the bill to ban municipal quick-take condemnation. With that backing Lee enlisted an influential legislator and MREA's influential membership. The fight was on.

EDUCATION, YOUTH AND COMMUNICATIONS

It takes more money to build an electric infrastructure than any other business in the world. It's expensive and complicated. Statewides sponsor training programs designed to educate employees and directors on the electric industry. NRECA features some of the best training programs in the nation. One popular course teaches directors the art of lobbying. Politics is a science: NRECA's teachers know their stuff. And, after that course, so do the attending managers and directors. They're primed to take the anti-quick take bill to the legislature. It's a good thing. The opponents enlisted 13 lobbyists.

Thousands of teenagers have participated in camps sponsored by statewides across the nation. The NRECA Washington, D.C., youth tour will soon celebrate 30 years. In that time, those rural electric kids have been elected to the U.S. Senate (Kansas' Sheila Frahm) and Congress (Texas Rep. Bill Sarpalius). Others dot state legislatures across the country or occupy key staff positions in Congress or in the state legislatures. In a legislative body becoming more urban through redistricting, representatives or staff who credit the rural electric program for teaching them about democracy become crucial allies.

So are the statewide publications. In North Dakota, the statewide publication has the largest circulation of any magazine. Thirty-two statewides sponsor publications which promote the rural electric agenda while featuring articles of interest to its members. More than six million co-op customers receive co-op publications. Surveys conducted by the statewide show customers like the statewide publication, which frequently features a co-op page.

While dissimilar in application, education, youth programs and statewide publications, give co-ops, through their statewide, enormous public standing. Each program promotes the co-op's agenda, which is the people's agenda. Educating the grassroots about their co-op translates into support from the co-op's back roads to legislative inroads. No wonder NRECA is emphasizing grassroots politics.

LEGISLATIVE ASSISTANCE

For 10 years CFC quietly provided financial grants to protect co-op territory, like PCPA. Without CFC's help, a northern Minnesota co-op would have sold to a private power company. The same is true with a Louisiana and Colorado co-op.

CFC's cash conserves co-ops. The coop's cashier has provided $4.7 million in the last decade to keep the co-op whole. The Rochester, Minnesota-based co-op received funds to help them obtain the best services they might not otherwise afford. Without CFC, we don't win as many fights. And People's Cooperative Power Association needed CFC's assistance to help tell why the co-op opposed quick take condemnation.

Frank Welter told the House Regulated Industries Committee his story. Quick take condemnation is bad stuff, he said. The coop has to know the price to be paid for territory taken to satisfy Rural Utilities Service's mortgage requirement. Local courts, Frank argued, are not schooled on utility property value as is the PUC. The other side said this bill denies municipalities the tools necessary to promote the public's purpose. Their 13 lobbyists fanned out to repeat that message like a mantra.

It wasn't a contest. Lee had the 47 MREA members' help. Managers and directors cornered their legislators in coffee houses. They visited with them after church. They sent letters. Co-op publications explained the complicated quick take issue to the co-op members. Co-op directors and managers traveled long distances to St. Paul. The message was the same: This bill is important. In the end, the Minnesota legislature passed the anti-quick take measure on a 2-1 margin.

LEGISLATIVE SAVINGS

Two years ago, NRECA's legislative efforts saved their members some $1.4 billion. That enormous sum represented the national efforts to prevent the sale of the nation's power marketing agencies and other related issues. By comparison, NRECA's member dues amount to about $14 million. That's an outstanding cost-benefit ratio. While not posting as dramatic savings for members, statewide legislative efforts prevent rate increases for members, ease burdensome regulations and simplify the co-op's operation. Here's a sampling:

In Oregon, Manager Sara Baker saved her 17 co-ops $2 million annually in property tax. Nebraska's rural electric system director per diem is set by the legislature. Manager Rex Carpenter has garnered several raises for them. Kansas and Indiana promoted legislation designed to allow coops to escape costly commission regulation. The Montana Statewide made it difficult to sell a co-op to a private power company. The Association of Missouri Electric Cooperatives and Tennessee Electric Cooperative Association placed a legislative premium on the taking of co-op territory. Together, statewide activity on legislative issues across the nation saved billions of dollars. It pays to belong to your statewide.

Clyde Ellis, a former Arkansas Congressman, was NRECA's first manager. He opined then "that electric cooperatives were born in politics and if they will thrive, it will be through politics." The NRECA Rural Electric Sourcebook said: "statewide manager . . . is a person who is very influential in the political life of his or her state." We think that's just right. Wyoming U.S. Senator Craig Thomas once managed the Wyoming Rural Electric Association. Retired Alaska Statewide Manager Dave Hutchens served with distinction in the Oklahoma legislature. North Dakota Association of RECs' Manager Dennis Hill fields calls calling for his candidacy for elected office. New Mexico Electric Cooperative Executive Vice President Robert Castillo once ran that state's public service commission. Statewide managers have a passion for the program.

That's why they dominate in states dominated by private power companies.

RESTRUCTURING

Three years ago Frank was duking it out with the municipality. Today, he and his municipal manager counterpart are discussing legislation to let them do joint activities. What in the name of deregulation is happening?

The entire electric industry is changing. Already the Pennsylvania Statewide helped to shape legislation allowing customers to choose their electric supplier beginning in 1999. The statewide Manager, Bill Mowatt, recognized the state's desire to provide customer choice which was prompted by high rates. The statewide worked closely with that state's legislative body to both provide choice while protecting the coop's on important territorial and tax issues.

Whether the Pennsylvania model will be adopted by other states remains to be seen. What is seen is collaboration, which beats contention. Both cooperative and municipally-owned utilities exhibit statutory and philosophical attributes which used in concert make us better. Fayetteville Electric had it right in the '60s when that Tennessee municipality merged with the neighboring co-op. The hybrid municipal/co-op combines the best elements of the two utility structures. In Minnesota, Kandiyohi Cooperative Power Association and the Willmar Public Utility caused legislation to be passed allowing them to work together to include the possibility of consolidation. Combining elements of the city utility with co-op allows sharing of equipment, personnel and management expertise. That economy of scale permitted by this Minnesota bill benefits both utilities.

Forty-eight states are discussing utility restructuring. Co-ops and municipal utilities find their philosophical similarities, as consumer-owned utilities, lead to agreements on restructuring issues, like stranded costs, service, environmental concerns, among other. In Minnesota, MREA is working closely with the Minnesota Municipal Utilities Association on issues ranging from utility deregulation to tax concerns. Other statewides are doing likewise.

The changes confronting the electric industry are the most pronounced in the last century. Traditional issues, like territorial protection so crucial to co-ops like People's Cooperative Power Association, are becoming anachronisms. Certificated service areas and monopolistic utility practices are being challenged under the banner of customer choice. If retail choice occurs, co-ops and municipal utilities are doing deals, instead of debating difference, to be the utility of choice.

The nation's statewides are dictating restructuring agendas. In Oklahoma, that statewide's able manager, Larry Watkins, drafted a measure promoting retail competition which promotes the co-op. In Wisconsin, the statewide, which is a division within the Wisconsin Federation of Cooperatives, is working with different consumer groups to mandate all customer classes benefit from any restructuring. The Michigan Electric Cooperative Association, despite being dwarfed by that state's giant power companies, ensured rural areas are treated equitably under that state's version of retail choice.

It's always been true: Statewides were created to do the things individual co-ops don't have the power to do alone. When the cooperatives coalesce, statewides will continue to do the things that benefit the members. The issues are different. The co-ops' concerns continue to change. Yet the traditional role of the statewide to foster unity on issues affecting its members will continue to serve its members well in the changing utility environment.

Mark Glaess started his rural electric career as a legislative representative with the Nebraska Rural Electric Association in 1979. In 1985, Glaess accepted the offer to become the first full-time manager of the Oregon Rural Electric Cooperative Association in Salem. During Glaess's 6 years as manager, ORECA represented the 17 member cooperatives on numerous state, regional and federal issues.

In November, 1991, Glaess was selected as the fourth manager in the 56-year history of the Minnesota Rural Electric Association. MREA represents 45 member-owned electric cooperatives and seven generation and transmission cooperatives who together provide energy to some 1.2 million consumers. MREA provides legislative representation, education courses, youth programs and loss control services.

Glaess is past president of the Rural Electric Statewide Managers Association. He holds a B.A. from Concordia College, Seward, Nebraska, and a M.A. from the University of Nebraska.
COPYRIGHT 1997 National Rural Electric Cooperative Association
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Copyright 1997 Gale, Cengage Learning. All rights reserved.

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Author:Glaess, Mark
Publication:Management Quarterly
Date:Jan 1, 1997
Words:2611
Previous Article:The value of a generation and transmission cooperative.
Next Article:Financial tool for competitiveness: the Cooperative Finance Corporation (CFC).
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