SADOW: LPSC New Co-Op Rules Don’t Go Far Enough

Better late than never, and even if not as extensive as necessary, it looks as if the Louisiana Public Service Commission finally will bring some fiscal responsibility to electric cooperatives, although inviting legislative intervention.

Wednesday, the PSC voted in new rules that would shine more light on compensation practices of the dozen co-ops. These would force co-ops into membership votes on such packages for directors, and set term limits on their service.

Co-ops are member-owned providers of electricity, set up under federal and state law to encourage this provision in areas once though difficult to serve. Despite the fact that Louisiana law establishes the part-time nature of directorships and specifies paying them no salaries, average compensation for these positions recently went over $26,000 annually, although some made over twice that and others nothing at all.

This has gone on for years, with longtime commissioners oblivious to the practice. PSC staff finally caught on to it and commissioners summoned outrage, ordering a review and new rules for their consideration.

But what the staff produced and what the PSC did differed dramatically. Because the state’s co-ops offered the most generous insurance benefits in the nation, originally staff wanted to do away with insurance offering entirely, a course other states increasingly follow. Also, it wanted to cap per diem payments around the national average of $375 (it had initially figured $200).

Instead, commissioners dispensed with these and instead ordered changes to bylaws that would allow current practices but provoke greater member scrutiny. This piggybacked on other staff recommendations designed to open up membership participation in governing decisions and to limit the agency problem (directors acting too independently of oversight), such as quorum reductions for member decisions and a three-term limit on directors. They did constrain insurance to packages no better than offered to employees.


While special interests representing co-ops mentioned possible litigation, complaining that the PSC can’t go in and force bylaw changes, that contention is absurd on its face. Louisiana law and its Constitution already do that, and past judicial decisions clearly validate the ability of the PSC to regulate in this area.

Still, the PSC’s tepid response should trigger legislative action. Part-timers for a nonprofit regulated by government have no business receiving lucrative health insurance for (in many cases) a handful of hours annually devoted to the enterprise, which with per diems and other expenses reimbursed in some cases works out to over $200 an hour in compensation. And if allowing that, then the per diem payments should be slashed, perhaps eliminated.

The spirit of co-ops was to help out your neighbors, not to gouge them. The new PSC rules start modestly to correct for that but need amplification.



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