Tuesday, January 15, 2019

Electric Co-ops & Lord Snow Fight Member Refunds

Are electric power associations overcharging their members? Tis the question asked in a war waged in court between several Mississippi electric cooperatives and their members. The members keep winning but the electric power associations keep appealing. 

Lakesha Butler sued Coast Electric Power Association in Harrison County Chancery Court in 2017.  The complaint accused Coast EPA of keeping "millions of dollars in revenue that it failed to return to its members." Coast EPA has nearly 80,000 members.  State law limits the profits held by the EPA's to 30% of their asset to equity ratio.

Ms. Butler alleged Coast EPA had $158,181,000 in accumulated  capital. She claims this patronage capital was equivalent to 45% of assets, thus $53 million, the capital alleged to be over the 30% threshold,  should be returned to Coast EPA members.

Similar lawsuits that asked for alleged excess revenue be returned to members were filed against other cooperatives in various chancery courts in Mississippi as well.* The plaintiffs asked the courts to refund $308 million to  187,250 member-owners.  The estimated average return per member sought is $1,650.  The plaintiff charged the EPA's with several counts of unjust enrichment, conversion, fraudulent concealment, negligence, and breach of fiduciary duty.


The co-ops tried to remove all complaints to federal court.  They claimed the disputes were subject to arbitration clauses while there were also questions of federal law.  The co-ops receive low-cost federal loans from the USDA's Rural Utilities Service.  It is argued the federal loans pre-empt state jurisdiction, thus protecting the co-ops from these lawsuits. 

 U.S. District Judge Keith Starrett said Coast EPA's argument meant "any state intrusion upon the discretion of its Board of Directors creates a conflict with federal law." Judge Starrett rejected Coast EPA's claims and sent the cases back to their respective chancery courts.

The EPA's did not go gentle into the night but doubled down.  Coast, Southern  Pine, and Dixie Electric Power Associations brought in one of Lord Snow's finest, Luther Mumford, Esquire**, and appealed to the Fifth Circuit Court of Appeals.   The Jackson attorney is one of the top civil litigators in Mississippi.

The EPA's argued the Rural Utilities Service exercises a great deal of supervision over the co-op when it approves a federal loan.  They contended EPA is a creation of the federal government under the Rural Electrification Act of 1936 and thus exempt from most state regulation. The distribution of an annual refund to members would allegedly drop the EPA's capital below 30% as well. 

The members replied that a lender is not a regulator.  Nothing in federal law pre-empts the state's regulation of the electrical co-ops. They argued - and Judge Starrett agreed - that they had drafted their complaints to specifically avoid federal questions.  If federal law does apply, then it merely limits recovery to revenues over the 30% threshold instead of voiding the issue of whether a refund is owed members. 

The Fifth Circuit heard oral arguments last week but has not rendered a decision.

* Delta, $64 million (Montgomery)
Twin County, $14 million (Washington)
Dixie, $21 million (Jones)
Pearl River Valley, $31 million (Pearl River)
Southern Pine, $112 million (Covington)
Southwest Mississippi, $13 million (Adams)

**Sorry, but Lord Snow has several non-legal divisions, thus it is necessary to state that Mr. Mumford is an actual attorney.  Don't want him to be confused for a lobbyist or "business expert".  

Kingfish note: Do these members actually think that this is their money?   The EPA's won a round yesterday as the House Public Utilities Committee unanimously approved their rural internet broadband bill, HB #366, with little notice.  The House votes today on the bill.  Passage is expected. 

Just curious.  How are EPA board members selected? Who counts the votes? Are the audited financial statements available to the members? What about by-laws? Do they provide them to the members as well or do they resemble HOA's built around pretty lakes in Madison County? Inquiring minds want to know. 

Then there is Lord Snow.  Huge issue in legislature while The Firm goes to war for the EPA's in court. 












47 comments:

Anonymous said...

Aren't the members the owners? How does that work where management decides to oppose the owners? Why don't the members just fire the management?

Anonymous said...

this is shocking-

Anonymous said...

Hmmm...so the Co-ops hired one of the most expensive lawyers in the state to keep their members out of what are at least generally and arguably their own funds? Yes, I understand that isn't exactly how electric co-ops work, i.e., the member-owners are not exactly like "normal" business owners directly entitled to a share of the business profits (or responsible for losses), but I wonder what would happen if BS management started trying to withhold profits from the members of the firm? I also wonder how and why these co-ops wound up with these large surpluses; after all, this is Mississippi and any time "other people's money" is involved, it seems like the same hogs crowd around the trough.

Anonymous said...

So the rate payers are actually owners of these co-ops?
Aren’t these the same Co-ops declaring they can provide broadband to the rural areas?
Clearly, there needs to be transparency and oversight of these monopolies.
Who’s going to look out for the rate payer? Brandon Presley?

Anonymous said...

Sitting coop Board members not only have a vote but also the individual vote(s) of each and every member-owner that "mails in their "proxy"" when that member can't or doesn't want to show up for the annual board meeting. The "power is in the proxies"- don't ever forget it. If someone had enough money i suppose they could buy-up all the proxies they could in a similar way that Mississippi Power and Light purchased Capitol Electric (a coop) back in the day. Coops stay cash flush perpetuating this fraud on broke ass rural folk. Rep. Steve Holland sits on a electric coop board. He knows how the game is played. Ask him.

Anonymous said...

Another electrifying expose by JJ.

Having lived in D'Iberville in the pastx i can off some experience for those not familiar. I always got 1 or 2 electric bills paid for by the refund. Never actually got a refund check. I had my bill set up to withdraw automatically and they emailed my statement.

Living on the coast, I just blew the extra cash at a casino or a trip to Bourbon St!

Anonymous said...

Who in the hell do you think is indirectly paying for "Lord Snow"? Its the broke back coop rate payers. What about campaign contributions steaks and whiskey for legislators...? Right again, the single mother chicken plant deboner with four kids living in a mobile home out on jerkwater RFD.

Anonymous said...

I don't know about all EPA's, but Central Electric has a stacked deck. They "elect" board members by county and stagger the years. Not bad, but the slate is sent to members in the mail with a proxy they ask you to return. If you return it you get entered in a drawing for a vehicle they are retiring plus prizes of toasters, waffle irons, coffee pots and stuff like that. The process for members nominating someone from the floor, well, it ain't gonna happen. The result -- the board never changes unles somone dies.

Anonymous said...

If you want to know what your friendly neighborhood electric coop staff members makes just google Mississippi electric coops 990 form. The truth shall set you free.

Anonymous said...

This patronage refund matter will be a "Kemper Plant" fiasco for the electric coops.

Anonymous said...

$112 million is an unholy amount of money. Southern Pine should be ashamed. Please stay on this, KF.

Anonymous said...

Did you ever stop to think that the information in this blog post might be incorrect? Bang bang, stop or I will shot. Come on people, stop buying all the crap people write on the internet.

Anonymous said...

I would think if the coops have to return equity the rates will go up as well. Careful.

Kingfish said...

Court docs are posted for you to read. Feel free to point out the errors. Co-ops didn't really make any arguments on the merits of plaintiff's allegations until the whole thing got to the Fifth Circuit from what i can tell.

Cynical Sam said...

Hopefully KF's reporting will spark some more interest down the line, though I anticipate a lot of tension which may not insulate those involved. At least some light is being shed here on this shocking news. Power to the people!

Anonymous said...

TVA coops (NE MS) rates are so much less than Cooperative energy, that is why all the major economic development is taking place in North MS. Someone should look at how much the Cooperative Energy management team makes (Jim Compton).....

Anonymous said...

Hmmm something smells fishy.

Anonymous said...

And once again where what is similar to public money is being spent on legal fees we see Lord Snow on the take.

Anonymous said...

Fishy Ponzi opportunists at Butler Snow seem to work both sides of most contraversial issues in our poor state. Without our your strong reporting none of us would ever know...Keep it coming.

Anonymous said...

I’m confused, Butler Snow’s legal eagles work for the EP Co-ops to help hide their profits while the Butler Snow lobbyists work against the EP Co-ops/and their agent Bran Precisly’s Broadband scheme.

Anonymous said...

Little country electric coops are not early adopters. They are "risk-averse". No way a coop board that really doesn't have any business serving on a coop board is going to jump out there and assist providing broadband to every jake leg that wants it. These coops are looking for another means to generate "pole attachment" revenues for their system. "Sure we will "sell" you a location to attach your hardware on "our" systems to serve the rural folk. They only got in on Solar after MS Power and Entergy jumped in as the trendy green power we care about the environment thing to do although it has to be "subsidized" to even work in MS.

Anonymous said...

Good for you for looking into this, KF. I work for a for-profit energy company in MS and I often have people tell me that they are glad they have electric/gas service by a municipal or a co-op and not my company. The reason they are glad is that they know their bills are cheaper because they "are not paying for the huge salaries of the CEO and top layer of management." I long ago gave up telling them that they were probably paying way more than they would be with my company because we have oversight from the MS Public Service Commission. Most "public" energy companies have little to no oversight and charge what they want with no accountability. 10:59, another great way to get that proxy back quickly (before they start thinking) is to automatically register them for a shotgun raffle once the proxy is back - you can imagine how well that works in Mississippi.

Anonymous said...

Steve Holland and others of his ilk are on one of these boards...
Bran Prisley want to ‘help’ them at every turn.
Why are they opposed to oversight and regulation of these monopolies?

Anonymous said...

These entities need oversight!

Anonymous said...

Is Lord Snow = Butler Snow the law firm?

Anonymous said...

How are we supposed to get a fair shake in the legal system as citizens with law firms working both sides of an issue?

Oh, and BS/BGR I hope you took note of your defeat today in London. Anything that goes along with the book “The Foundations of Geopolitics” is highly suspect.

To think think BGR has officially been representing, more or less, both ends the of Moscow-Terhanian Axis described therin. 🙄

Anonymous said...

4:35 = "Short Bus" (As in, you rode the short bus to school.)

Anonymous said...

So, here's my experience with SW MS EPA. Been a member of a large hunting camp in Copiah county for many years. There are about 30 RVs and cabins on a 1/4 - 1/2 acre lot right up on a public road. Each is required to have it's own power hookup and account. For years, my summertime power bill was about $5 a month, based on actual usage (nothing running in off season other than a refrigerator). This was typical for others as well.

Then we all got a notice from SMEPA that we could expect "minimum monthly billing", "in order to cover the cost of power line maintenance". Everyone's MININUM monthly bill immediately jumped to about $40 per month... versus the $5 per month actual off season usage... times 30 accounts in this camp... you do the math. There are a lot of hunting camps and leases in SW MS!!!

Maybe that's one of the sources of "surplus funds"....

Anonymous said...

This is going on all throughout rural America. Take a look:

https://www.greenvilleonline.com/story/news/2018/08/13/has-absolute-power-corrupted-south-carolina-electric-co-ops/977257002/

The ONLY way to solve this is for EPA members – i.e. good old folks – to organize and vote out the corrupt board members. Some plain ole John Q. Citizens are going to have to step up. Maybe, dear reader, that is YOU! However, it will come at a high cost and require great perseverance: https://www.facebook.com/Take-Back-Our-Grady-EMC-1080800375266276/

Don’t expect your elected politicians to help or your news media to investigate and report. The boards are counting on the members’ ignorance and indifference. Keep sitting on your fannies and you will keep on getting ripped off.

KF: You are asking questions that are answered by reading the By-Laws of an EPA.


Anonymous said...

Amazing display of ignorance.

Anonymous said...

I moved to the Metro from Twin-County-Power coverage 25 years ago and periodically get a check for a couple hundred bucks from years ago profits that were apparently not properly distributed to coop members. Not every year, but maybe six or seven in that time span.

Yes, the rate payers are due that money, have a right to it and hold ownership of it, legally.

Board members are elected, but proxy rules since nobody gives a shit. People just want their damned lights to come on when the switch is flipped.

Anonymous said...

What large electric customers there are that are served by an EPA/ECM/Coop, need to ask if their rates are "subsidizing" the cost of other member-owner/customer/rate payers? There it is folks. This $hit is happening but their is no damn way you can receive a straight answer on rate structures from a coop general manager hiding behind a desk (usually with his secretary) most of the time.

Anonymous said...

If I was a board member on a coop board, I might consider voting to sell the electric coop that I serve on. Somebody cut me an after-tax check for $250,000.00 I'll vote to sell. That's a good investment strategy these days.

Anonymous said...

Coast Electric is a bunch of fucking crooks. I updated my AC system with a certified AC contractor and because he used two different parts brands inside and out, they denied to give me my credit for installing a new more efficient system. I spend a stupid amount of money just to keep a couple of fridges on while I am gone. I hope Lord Snow kicks their ass.

Rod Knox said...

I wonder how many of the Co-ops are incorporated in Delaware? Delaware corporations can redefine profits as excess funds and mail the funds to designated individuals untaxed. For the curious look into the Delaware's advertisements in financial e-periodicals. It takes some effort for a non MBA like myself to see the full picture but even I could divine the gist of the $ituation. And for the curious with nothing better to do check Mississippi's non profit hospitals incorporated in Delaware.

Anonymous said...

Are these coops planning on using existing ROW easements? I don't want them burying cable on my lands that they already rut up, cut locks on my gates, etc. ??? Obviously once again no one looking out for the landowner. Existing easements were for electric service not fiber broadband! NO COOP NO WAY TRENCHING ALL OVER MY PROPERTY AGAIN!!!!! THIS IS BULL$hit IF THIS IS WHAT THEY ARE PLANNING.

Anonymous said...

Aren't these coop rubes overlooking one of their famous 7 Cooperative Principles, "Democratic Member Control"? Shouldn't the MEMBER customers then have a voice in whether or not their coop jumps off into broadband, natural gas service, satellite TV ??? Once again, plowing on past and over their members....

Anonymous said...

Landowner rights blatantly being overlooked here- I don't want anybody else on my property more often than they are now.

Anonymous said...

Who argued on behalf of the member-owners owed these excess profits?

Anonymous said...

Are the coop utility ROW easements legally filed in the local courthouse? That is to say, if they are not? Are the ROW easements now being used by coops legal? Do coop's ever pay anything for ROW easements? These SOB's will use eminent domain if they wanted to on taking your property.

Mick Jagger said...

Internet service is really like an oceanfront view, its just no way in hell to ever have it where I am at. You cant always get what you want. If I want to see the ocean, then I will go visit or move closer to the ocean.

Anonymous said...

This was a similar problem in SC. The boards lost.

https://www.greenvilleonline.com/story/news/2018/08/13/has-absolute-power-corrupted-south-carolina-electric-co-ops/977257002/

Anonymous said...

Here it is people:

Seen some co-op board members retain their seats for decades. At 17 co-ops, boards pick the members of the nominating committee that screens candidates for board positions, effectively giving directors control over any potential challengers. Last year, for instance, Tri-County’s nine-member nominating committee for the co-op’s board included six direct relatives of board members.

This is what happens in Mississippi. This rigged "nominating committee" bullshit. Low-life coop board attorneys know this. And the coop GM and Board select the nominating committee....

Anonymous said...

1:28, True, but co-ops have by-laws that allow candidates for director positions to be added to election ballots, separately from the nominating committee, by member petitions with a requisite number of signatures (usually a very small percentage of the membership). A few co-ops have been successful in removing corrupt directors by this method. Sadly, because of the ignorance and indifference of the members, many EPAs don’t even have someone try to start a petition drive.

Board directors also clandestinely change the co-ops’ by-laws that legally can only be changed by the membership. This is what happened recently in a Georgia co-op where the directors simply changed existing by-laws that prohibited the election of a director who has a relative working for the co-op. A dedicated member noticed that wording has been altered in the by-laws and went to court, the judge declared the election of the director null and void. The directors simply ignored the court ruling and kept right on meeting and the illegal director kept on receiving monetary compensation, health insurance, and retirement benefits — until the subject of contempt of court was brought up by the dedicated member.

Anonymous said...

I'm pretty sure House Speaker Philip Gunn has taken over $100,000 in donations from the Electric Cooperatives of Mississippi Political Action Committee... FYI

Anonymous said...

Bill Jones, Justin Glenn & Brannon Berry (Cosmich Simmons and Brown - Jackson) appeared at hearing. Berry argued.Heard the young buck held his own against Lord Snow's finest ivy-leaguer..Mumford. Online at 5th circuit site

Anonymous said...

Google the Form 990 for any of these cooperatives and scroll down to see the compensation for the directors and you will discover why those boards rarely turn over, especially on the larger ones. It’s a rigged game in the nominating process. Also see “Electric Cooperatives of Mississippi”, the organization where their lobbying happens. The whole cooperative system in MS needs more sunshine and public scrutiny.

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