How Rural Electric Cooperatives Can Support a Green New Deal

Pedernales Electric Cooperative Christmas Lights,” Mike Rastiello

Today, as President Joe Biden’s $2 trillion infrastructure bill is debated in Congress, it’s worth recalling that this isn’t the first time the US has faced an infrastructure deficit. “By the 1930s nearly 90 percent of US urban dwellers had electricity, but 90 percent of rural homes were without power. Investor-owned utilities often denied service to rural areas, citing high development costs and low profit margins,” recalls one account.

The policy response: rural electric cooperatives (RECs). In 1935, President Franklin Delano Roosevelt signed Executive Order No. 7037, establishing the Rural Electrification Administration—today’s Rural Utility Service (RUS)—which provided low-cost loans to co-ops to wire rural America; by 1953, 90 percent of rural Americans had power.

There is a lesson in this—and it is not just the power of the cooperative business model to solve problems, although that is important. Indeed, as NPQ has covered, RECs can play a key role today to close the rural-urban broadband gap. But there is a lesson about politics, too, because it is worth asking how RECs became the dominant form of electric provision in rural America. Turns out there is a century-and-a-half-old tradition of progressive organizing in rural America.

Some readers may recall that today’s public bank movement, which aims to create city- and state-owned entities that can hold and invest public funds and remove them from Wall Street banks, is seeking to follow a playbook the Bank of North Dakota has used since 1919. And that entity wouldn’t exist but for a quasi-socialist political party known as the Nonpartisan League that won power in the state in the late 1910s. Co-op organizing, too, is part of this rural radical tradition, and co-ops even today retain a central organizing role in much of rural America, including in agriculture.

It was because of this tradition that when the opportunity to get loans from the federal government to create electric co-ops arrived in the 1930s, the co-op form resonated. Farmers, ranchers, and other community members readily took advantage to wire isolated rural areas. Henry Wallace, an Iowan who served as the Agriculture secretary and would become a kind of Bernie Sanders-type figure and later run for president on a third-party ticket in 1948 and garner over a million votes, oversaw the startup of the loan and technical assistance support programs in Washington. But REC-led electrification in rural America wouldn’t have happened without the commitment and vision from the residents who organized themselves into cooperatives, applied for the loans, and literally put up the poles and lines in their communities. These bold actions brought light, energy, and endless opportunities to their communities by creating electric co-ops that were owned by the residents they served.

Today, there are about 900 RECs located in 47 states that provide electric power (and sometimes broadband and other services) to 42 million people. And yet, what started as community members working together and seizing opportunities to make life better for their families has largely calcified into a system of aging governing boards protected by practices that disenfranchise voters.

To build a basis for green power generation in rural America is an organizing challenge, just as much as it is a technical challenge of closing polluting facilities and replacing them with new facilities that generate renewable-sourced power.

The Slow Demise of the Spirit of Cooperation in RECs

Cooperatives throughout the world operate according to seven basic principles: (1) voluntary and open membership, (2) democratic member control, (3) member economic participation, (4) autonomy and independence, (5) education, training and information (6) cooperation among cooperatives, and (7) concern for community.

Adherence to the spirit of these principles allowed RECs to boom for decades and improved the quality of life for the people they served—not just by providing electricity, but also by being investors in local community economic development.

Yet today we find in RECs high consumer bills, a lack of racial diversity in board positions, a lack of access to simple technologies such as broadband internet, and dirty energy production that has negative health and climate implications. For example, 60 percent of co-op power comes from coal, compared to 30 percent for all other electric utilities. To make matters worse, these plants are underperforming and are more costly to member-owners, as opposed to a more diversified generation portfolio that non-cooperative utilities are actively pursuing across the country. Far from leading the green power revolution, RECs are green power laggards.

And while there are many positive exceptions, RECs have often fallen short in investing in the local economy. From the bluegrass of Kentucky to the plains of Texas and beyond, rural residents suffer due to structural racism and systems that value profit over low-income households. More than 90 percent of the “persistent poverty” counties in the US are served by RECs. Around 250 RECs serve Native American nations. Most rural Black communities are served by electric cooperatives as well.

RECs are by statute democratic organizations, but in many RECs, internal democracy has atrophied. Too often, co-op member-owners find themselves unable to attend board meetings, review financials, participate in board elections, or even influence energy policy within their co-ops. As result, an insular “good ol’ boys” network often emerges to fill the power vacuum.

This lack of member participation has real-world effects. The further co-op leaders stray from centering the voices of member-owners, the greater the challenges co-op members face. These include high energy cost burdens, boards that don’t reflect the race and gender demographics of the community served, and mounting shortfalls in local weatherization and energy-efficiency performance.

The Emergence of the Rural Power Coalition

While decay took decades, a new movement for electric co-op democracy is gaining ground. Member-owners are leading the charge across the country in places like the Tennessee Valley, Alabama, Georgia, Missouri, and Minnesota. The movement’s goals are to foster democracy, implement inclusive energy efficiency programs, and center equity in spaces that are white male–dominated.

Seven organizations in five states have joined forces to pursue this more inclusive vision. These organizations are Appalachian Voices (Virginia); Clean Up the River Environment, or CURE (Minnesota); Kentuckians for the Commonwealth; Mountain Association (also Kentucky); Partnership for Southern Equity (Georgia) Renew Missouri; and the Western Organization of Resource Councils, or WORC (multistate).

This Rural Power Coalition (RPC) first came together in the summer of 2020 to identify how to get creative with the policy window opened by pending COVID-related relief legislation for rural utilities to benefit our communities. As we started to identify how the NRECA (National Rural Electric Cooperative Association)—the national REC trade association—was going use federal resources, we saw a clear opportunity to find out from member-owners themselves how they would like to be helped.

The approach favored by NRECA and lawmakers seeks to prioritize programs like LIHEAP (the Low-Income Home Energy Assistance Program), which helps reduce member-owner debt and arrears concerns from past due bills. However, we started to realize that regardless of the pandemic, RECs are not in a sustainable economic situation. Instead of giving RECs a bailout to continue to operate their uneconomical fossil-fuel plants, we proposed that the federal government instead condition its bailout of RECs to compel them to transition to a more sustainable operation based on developing new sources of renewable energy.

This movement believes that RECs, if rejuvenated and brought back under member control, are perfectly positioned to address most of their communities’ equity concerns, with equity in this context defined as “creating the conditions that enable just and fair inclusion into a society in which all can participate, prosper, and reach their full potential.”

To date, we have seen changes occur at over a dozen co-ops. An example of this potential comes from the Kit Carson Electric Cooperative, one of the oldest RECs in the country, based in New Mexico. Member-owners discovered their contract with Tri-State Generation and Transmission Association, an energy supplier company, was a barrier preventing them from investing in renewable energy. But unlike many of their colleagues, because of successful member organizing, the board of Kit Carson authorized co-op management to pay a fee and exit the contract. The co-op now has a contract with Guzman Renewable Energy Partners, which will allow the co-op to meet its clean energy goals.

Envisioning a New Federal-REC Partnership

Currently, NRECA is lobbying in Congress for passage of a bill called the Flexible Financing for Rural America Act. The proposed bill effectively is a $10 billion request to refinance existing co-op debt with RUS at lower rates without penalty.

This proposal does not go far enough, because it does not provide any incentives to transition to cleaner power and provides no guarantee that co-op members would share in the benefits. In essence, RECs are seeking relief from the federal government to continue operating while a record number of member-owners are behind on their bills and nearly two-thirds of their power supply depends on coal.

In response, in February, RPC members penned a joint open letter—cosigned by several dozen organizational supporters—that outlined both what resources are required and what commitments RECs must make in return for federal support. The measure we outlined would directly benefit millions of cooperative member-owners who are currently struggling to pay their bills, while committing RECs to invest in converting power from coal plants to renewable sources.

The voice of RPC has been heard in Washington, DC. President Biden’s American Jobs Plan currently includes $10 billion to retire REC-owned coal plants and replace them with clean energy. While $10 billion will help this program get off the ground, we need ten times that amount—or $100 billion—to complete the transition away from REC-owned fossil plants. There are currently 300 fossil-fuel-based generators operated by the RECs which accounts for over 57 Gigawatts of total capacity from these facilities. It is not going to be cheap to close these plants and enable local communities to reinvest after their closure.

The RPC member-owner proposal also calls for reforms to the RUS Hardship Loan program to empower RECs to center economic and environmental justice in their work. Specifically, this plan would direct $100 billion to RECs in exchange for forgiving residential utility bills that are in arrears, continuing to deliver power to low-income Americans, and delivering more renewably sourced energy to rural households. This investment would directly mitigate some of the economic hardship many rural people face today and jump-start infrastructure projects that will create hundreds if not thousands of good-paying jobs. Currently, many RECs are stuck paying debt on outdated and expensive coal assets. This cost gets passed down to member-owners in the form of higher monthly bills. Modifying RUS repayment rules would enable these cooperatives to afford the cost of shutting down their aging coal plants and transition to a more sustainable portfolio that invests in solar, wind, and energy efficiency.

Why Co-op Democracy Can Contribute to a Green New Deal

As was true when RECs were established in the Great Depression, the success of RECs today requires active member-owner participation and the support of those who are committed to closing the rural-urban renewable energy divide. Small cities and rural towns know the perpetual cycle of being left behind all too well. But by working together, we can set forth a more positive path. Now is the time for a just transition. As more communities take back their co-ops, the nation’s network of RECs can become models of hope, investment, and prosperity once again. And rural America can become full partners in the transition in power generation from coal to renewable sources that must occur if our country is to meet its carbon emission reduction goals.

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