NRECA CEO Jim Matheson hailed the heroic efforts of electric cooperatives during the COVID-19 pandemic at an energy leadership conference and said co-ops are ready to work with a new Congress and administration to ensure reliable and affordable power for their members.

“Co-ops really are about constructive, positive ideas to help the communities that they serve,” Matheson told the U.S. Energy Association’s State of the Energy Industry Forum held virtually Jan. 28. “That’s how we’re going to look at the tough days ahead in terms of the pandemic and everything else.”

A top policy priority is a bill to allow electric co-ops to reprice billions of dollars in Rural Utilities Service loans without penalty. Being able to take advantage of today’s low interest rates would help co-ops save more than $10 billion and reduce electricity costs for 42 million Americans, many of whom are financially challenged, he noted.

“Most businesses in America have had the ability to refinance and take advantage of the lower cost of capital, but for co-ops it will take an act of Congress,” said Matheson. “Any decision that affects co-ops affects the rates we charge our consumers.”  

NRECA last year forged a bipartisan coalition of 127 House and 25 Senate members in support of repricing RUS loans, but the provision was not included in the final spending package in December.

“We will continue to build on these efforts in Congress to get this across the finish line in 2021,” he said.

NRECA also will work for parity for not-for-profit co-ops on tax incentives for renewable energy, energy storage and carbon capture and sequestration, Matheson said. “It’s important for us to be part of the solution in the deployment of these technologies.”

Should bipartisan infrastructure legislation gain traction, Matheson said NRECA will work to include investment in the electric grid and rural broadband.

“Broadband has got to be part of an infrastructure package,” he said. “We stand ready to ensure that rural America has access to the broadband service that the rest of the country has.”

Matheson underscored how providing reliable and affordable electric service is fundamental to electric co-ops.

“We serve 92% of the persistent poverty counties in America,” he said. “When co-ops talk about affordability, we’re talking about consumer-owned utilities, and these consumers are in challenging economic circumstances. So that affordability issue, I know it matters to everyone, but I want to tell you that it’s a big deal for us. It’s in our DNA, and it’s something we think about every day.”

Listen to a recent NRECA podcast episode on advocating for co-op priorities in the new Congress and new administration:

Cathy Cash is a staff writer at NRECA.

NRECA and member co-ops are gearing up to press the new Congress and incoming Biden administration to support legislation that could save electric cooperatives more than $10 billion by allowing them to reprice Rural Utilities Service loans at current low interest rates.

The bill was not included in a year-end package passed in December by the last Congress. However, the Flexible Financing for Rural America Act has strong bipartisan support and is expected to be reintroduced in the 117^th Congress. It could become part of a larger COVID-19 relief package that President-elect Joe Biden is urging lawmakers to pass early this year.

Although the previous Congress did not take up the RUS bill, lawmakers passed several spending provisions that benefit co-ops and their consumer-members, including $5.5 billion for RUS electric loans, nearly $4 billion for the Low-Income Home Energy Assistance Program that helps struggling families, and $25 billion in rental assistance that renters can use to pay their utility bills.

Congress also approved more than $17 billion for the Federal Emergency Management Agency Disaster Relief Fund and $635 million for the U.S. Department of Agriculture’s ReConnect Loan and Grant Program, which helps fund broadband deployment in rural America. Lawmakers also extended the Paycheck Protection Program, which provides forgivable loans to co-ops and other small businesses to keep employees working during the pandemic.

NRECA will continue to advocate for the RUS refinancing bill, which would provide a much-needed boost to co-ops hit hard by the COVID-19 pandemic. The pandemic has reduced demand for electricity from many commercial and industrial co-op members struggling to survive, including oil companies, agricultural producers and businesses that depend on tourism.

Some residential consumer-members have been unable to pay their electric bills amid job losses and other financial hardships. NRECA economists have estimated that co-ops could lose up to $10 billion in revenue through 2022 as a result of the pandemic.

 “Our message to Congress is that we simply want to act like other businesses across America and be able to refinance debt without penalty,” said NRECA CEO Jim Matheson. “It would be significant for the financial stability of electric co-ops right now, but it’s also important in the long term for the resurgence of the economy in rural America.”

The proposed legislation would allow co-ops to request rate adjustments on their existing RUS loans from the USDA within 180 days of the bill’s enactment. It would waive any prepayment penalties normally associated with RUS refinancing. The new interest rate available to co-ops would be the U.S. Treasury rate that most closely matches the remaining term on the loan being repriced.

Based on current interest rates, NRECA estimates that co-ops could realize a net savings of $10.1 billion from repricing $42 billion of direct and guaranteed RUS loans held by about 500 co-ops. An average co-op with typical RUS debt could save $2 million a year in interest payments if they could take advantage of today’s rates.

Erin Kelly is a staff writer at NRECA.

ARLINGTON, Va. – National Rural Electric Cooperative Association (NRECA) CEO Jim Matheson today thanked Congress for including provisions in the year-end spending package that support electric cooperative members and their communities struggling during the pandemic, but expressed disappointment that lawmakers failed to include a key priority for electric co-ops in the bill.

“Rural communities are suffering the economic impact of the pandemic,” Matheson said. “We’re disappointed that Congress did not waive the pre-payment penalty for electric co-ops to refinance Rural Utilities Service debt at today’s low interest rates. Doing so would have given cooperatives the same opportunity to refinance that other businesses enjoy and produced $10 billion in savings to help rural families and businesses navigate these difficult times. However, there are many other elements of the bill that will support co-op members and their communities, and we are deeply appreciative that Congress has met these needs.”

Key energy provisions supported by electric co-ops include:

• $25 billion in rental assistance, including payments for utility bills.
• Extension and simplification of the Paycheck Protection Program, allowing utility bills paid with PPP funds to be forgiven. The bill allows businesses to deduct PPP expenses and gives those experiencing severe revenue reductions an opportunity to apply for a second PPP loan.
• Additional investments in the USDA ReConnect program, the Community Connect broadband program, funding for broadband mapping, tribal broadband infrastructure, FCC telehealth, and emergency funds for low-income families to access broadband through the FCC.
• The EASE Act, which will provide grants and technical expertise to help electric co-ops implement energy storage technologies and encourage their deployment nationwide.
• Research, development & deployment funding for solar, wind, hydro, nuclear energy and carbon capture technologies.

“As electric co-ops work to meet the evolving expectations of their consumer-members and communities, public funding for energy innovation is essential,” Matheson said.

The National Rural Electric Cooperative Association is the national trade association representing nearly 900 local electric cooperatives. From growing suburbs to remote farming communities, electric co-ops serve as engines of economic development for 42 million Americans across 56 percent of the nation’s landscape. As local businesses built by the consumers they serve, electric cooperatives have meaningful ties to rural America and invest $12 billion annually in their communities.

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Last updated: Nov. 7, 11:30 a.m.

Joe Biden’s victory in the presidential race sets the stage for the former vice president to implement sweeping environmental policy changes. But his planned agenda will likely be muted by what now looks to be a divided Congress, with a Republican-led Senate and a diminished Democratic majority in the House.

In the near term, Biden is expected to push for a broad economic stimulus plan shortly after he takes office in January, presenting opportunities for NRECA to secure more pandemic relief for co-ops and their consumer-members.

“Vice President Biden has been clear that the two most important things facing our country are health care, especially related to the pandemic, and the economy. We agree,” said NRECA CEO Jim Matheson. “We are focused on supporting our members in the development of the next COVID relief package, including RUS loan refinancing, shortfalls caused by nonpayment of bills and protecting those consumer-members who are least able to pay their bills.”

Senate Majority Leader Mitch McConnell, R-Ky., said he wants to move another economic stimulus package before the end of the year.

Matheson said NRECA will work with bipartisan champions in Congress to pass the Flexible Financing for Rural America Act, which could save co-ops more than $10 billion by allowing them to reprice loans from the Rural Utilities Service at current low interest rates. The bill would waive any prepayment penalties normally associated with refinancing.

“Our priorities remain the same: to protect the interests of America’s electric cooperatives and to ensure government doesn’t get in the way of affordable, reliable power,” he said.

Over the longer term, electric co-ops will work to shape a $2 trillion plan Biden campaigned on that would eliminate carbon dioxide emissions from the electric power sector by 2035 and replace fossil fuels with zero-emission sources such as wind, solar, nuclear, hydropower and biomass. The divided Congress could affect how aggressively the incoming administration pursues these goals.

 “The vice president has put forward principles, but the details really matter,” said Louis Finkel, NRECA’s senior vice president for government affairs. “And as those details emerge, we will evaluate them based on the tenets of affordability, reliability and resiliency.”

Biden has also touted the need to pass a comprehensive infrastructure spending bill to rebuild the nation’s aging highways and bridges and invest in public transportation and electric vehicle charging stations. He is pushing for rural broadband deployment as part of that plan.

 “Our long-standing approach—to work in a bipartisan fashion with lawmakers—is going to continue to be important,” Matheson said. “Regardless of who is in control of the Congress, we feel good about the champions that we’ve worked with on both sides of the aisle. No piece of legislation we’ve ever championed has been partisan, and we will continue to work with Republicans and Democrats alike.”

Erin Kelly is a staff writer at NRECA.

The U.S. Department of Agriculture has approved $3.1 billion in rural infrastructure loans for 45 electric cooperatives that will improve service to more than 1.4 million homes and businesses.  

USDA announced its latest round of Electric Loan Program awards on Oct. 22. The Rural Utilities Service loans and loan guarantees will go to projects in 25 states to upgrade or build about 3,741 miles of transmission and distribution lines, the agency said. In addition, $158 million in loans will go toward smart grid technology and digital communications to help detect and respond to outages.

“Working and accessible rural electric infrastructure is a cornerstone to prosperity in America’s heartland,” said Agriculture Secretary Sonny Perdue, adding that the funding “ensures this major infrastructure network remains reliable for the millions of Americans who depend on it every day.”

Recipients of this latest round of USDA loans include large power providers that serve dozens of distribution systems and small co-ops serving sparsely populated swaths of land.

In Colorado, K.C. Electric Association, headquartered in Hugo, serves about 6,500 members over 3,072 miles—a line density of 2.7 members per mile. About $1 million of its total $9.2 million loan will go toward smart grid technologies, specifically installation of a new supervisory control and data acquisition system.

The loan also will “rebuild aging lines to make our system more reliable, real-time and efficient,” said David Churchwell, the co-op’s general manager.

Other loans include a $14.5 million loan to Butler County REC in Allison, Iowa, to build and improve 208 miles of line and a $24 million loan to Central Power Electric Cooperative in Minot, North Dakota, to finance transmission system improvements.

Victoria A. Rocha is a staff writer at NRECA.

The House passed a $2.2 trillion COVID-19 relief package Thursday that includes $4.5 billion to help struggling families pay their electric bills.

The Senate is not expected to take up the bill, but NRECA will push for the funding for low-income families—and RUS loan repricing—to be included in final compromise legislation the House and Senate may ultimately be able to craft with the Trump administration.

The relief package passed by the House on Thursday is an updated version of the HEROES Act and would boost funding for the Low-Income Home Energy Assistance Program, known as LIHEAP. Funding for the program, a NRECA legislative priority, is triple the amount in the earlier version of the bill and would help electric cooperative members and other consumers heat their homes this winter. NRECA leaders say the assistance is especially crucial during the pandemic, which has battered the rural economy and increased unemployment.

“The significant increase in LIHEAP funding will help consumers pay their bills and avoid growing debt during these difficult economic times,” said NRECA CEO Jim Matheson.

The House package did not include NRECA’s top legislative priority, the Flexible Financing for Rural America Act. That bipartisan bill could save co-ops more than $10 billion by allowing them to reprice loans from the Rural Utilities Service at current low interest rates. It also would waive any prepayment penalties normally associated with refinancing.

However, the House-passed package provides $2.6 billion in grants for co-ops that are already RUS borrowers and are suffering financial hardships from the pandemic. That amount is close to the first-year funding levels required for the RUS repricing bill and would create room in the budget for negotiations with the Senate. NRECA lobbyists will work with lawmakers to include the RUS loan repricing provisions in the final package approved by Congress.

Negotiations among the House, Senate and Trump administration are expected to continue as both parties try to provide more COVID-19 relief before the November election. The Flexible Financing for Rural America Act has widespread support, with more than 100 bipartisan co-sponsors in the House and more than 20 in the Senate.

“As Congress continues to discuss another COVID-19 relief package, electric co-ops are heartened that leaders are recognizing the need to address the financial strain that co-ops and their consumer-members are facing,” Matheson said. “We also look forward to discussing options that would allow electric co-ops to seize on historically low interest rates and enable long-term financial certainty.”

Erin Kelly is a staff writer at NRECA.

NRECA is supporting a bipartisan House bill that would give electric cooperatives a temporary tax credit to help keep their retirement plans funded during the COVID-19 pandemic.

The Preserving Employee Retirement Savings Act, introduced by Reps. Brad Schneider, D-Ill., and Mike Kelly, R-Pa., would provide a two-year tax credit for up to 20% of the retirement costs paid by co-ops and other small businesses experiencing hardships because of the pandemic.

The credit would be refundable, so even a tax-exempt co-op that pays no federal taxes would be eligible to receive as much as $100,000 in 2020 and 2021.

The tax credit would not count as income for co-ops, so it would not threaten their tax-exempt status. To remain tax-exempt, co-ops cannot receive more than 15% of their income from non-member sources.

The credit would apply to both defined benefit and 401(k) retirement plans if co-ops maintain them at current levels for “non-highly compensated employees.” The Internal Revenue Service defines highly compensated employees as workers who earned more than $130,000 in 2020 from an employer that sponsors their 401(k) plan.

“We worked closely with the bill sponsors to make sure that all NRECA members, whether they are taxable or tax-exempt, are fully eligible for this tax credit,” said NRECA benefits lobbyist Chris Stephen.

“And, given our members’ incredible work to enact the RURAL Act late last year, the bill specifically exempts it from ‘member income’ to avoid any potential 85/15 issue.”

Last December, Congress passed the RURAL Act, protecting more than 900 electric cooperatives nationwide from the risk of losing their tax-exempt status when they accept government grants for disaster relief, broadband service and other programs that benefit their members.

NRECA joined with other not-for-profit groups, including the Girl Scouts, The Jewish Federations of North America and Christian Schools International in a recent letter endorsing the new retirement tax credit bill. NRECA is working with the bill sponsors to look for opportunities to pass the legislation this year.

“The bill assists small employers, like us, who are trying to ‘do the right thing’ for our employees by preserving current retirement benefit levels during this unprecedented COVID-19 pandemic,” the letter says.  

“During the Great Recession, employees suffered greatly when many employers were forced to reduce retirement benefits. We have an opportunity, right now, to prevent this from happening during an even more challenging time.”

Erin Kelly is a staff writer at NRECA.

A bipartisan group of House members is urging congressional leaders to make sure the next COVID-19 relief package helps electric cooperatives survive the pandemic by saving them more than $10 billion in interest payments on their federal debt.

“These savings can be passed on directly to consumers, used to invest in quality rural broadband networks, or upgrade and replace aging electric infrastructure, all of which will help workers and families in rural communities who continue to weather the COVID-19 crisis,” nearly two dozen lawmakers wrote in an Aug. 4 letter to House Speaker Nancy Pelosi, D-Calif., and Minority Leader Kevin McCarthy, R-Calif.

The letter, signed by 13 Republicans and nine Democrats, was led by Reps. Tom O’Halleran, D-Ariz., and Vicky Hartzler, R-Mo. The two lawmakers recently introduced the Flexible Financing for Rural America Act, which would allow co-ops to take advantage of current low interest rates to reprice their federal Rural Utilities Service loans without being hit with prepayment penalties.

NRECA, co-op leaders and other supporters of that bill believe the best way to get it approved is to attach it to a sweeping package of pandemic relief measures that congressional leaders and the administration are negotiating.

“COVID-19 has laid bare the need for rural development investments and greater access to broadband services,” the House members wrote. “Many parts of rural America were caught unprepared as students were sent home, employees were forced to work remotely, and rural communities worked to control the pandemic.

“While COVID-19 halted several essential services, member-owned electric cooperatives, broadband and voice (phone) providers ensured Americans remained connected while the mounting financial strain from the pandemic continued to increase.”

Listen to NRECA CEO Jim Matheson and Montana electric co-op leaders as they discuss the value of the bipartisan Flexible Financing for Rural America Act

A bipartisan group of senators, working with NRECA, sent a similar letter on Aug. 14 to Majority Leader Mitch McConnell, R-Ky., and Minority Leader Chuck Schumer, D-N.Y. The bill was signed by 10 senators, evenly divided between Republicans and Democrats.

Based on current interest rates, NRECA estimates that co-ops could see a net savings of $10.1 billion from repricing $42 billion of direct and guaranteed RUS loans held by about 500 co-ops. An average co-op with typical RUS debt could save $2 million a year in interest payments by taking advantage of today’s lower interest rates.

The 20-year U.S. Treasury rate was at 1% on Aug. 5. Co-ops are paying varied rates, depending on when they obtained their loans from the U.S. Department of Agriculture’s RUS program. Some co-ops are paying rates higher than 5%.

“Providing this opportunity to refinance existing loans will reduce debt burdens on rural electric and broadband providers and unleash needed infrastructure improvements in rural communities,” the House members wrote.

Erin Kelly is a staff writer at NRECA.

Listen: Electric cooperative leaders discuss the value of the Flexible Financing for Rural America Act

As Congress works to reach agreement on a new COVID-19 relief package, electric cooperative leaders urged lawmakers to include a bipartisan bill that would save co-ops more than $10 billion in interest payments on their federal debt and provide financial relief during the coronavirus pandemic.

“This is a really important issue for rural America,” NRECA CEO Jim Matheson said Monday during a telephone press conference as Congress returned from recess to negotiate a bill. “The rural areas will face the longest effects of an economic recovery and that’s why this legislation is important, both for the situation we face today and for the long run.”

Matheson and three co-op CEOs pushed for lawmakers to pass the Flexible Financing for Rural America Act as part of any broad coronavirus aid package they approve next. The bill, introduced in both the House and Senate on July 2, would allow co-ops to take advantage of current low interest rates to reprice their federal Rural Utilities Service loans without being hit with prepayment penalties.

The legislation could help co-ops and their members survive the financial impacts of the pandemic. NRECA economists estimate that co-ops could lose up to $10 billion in revenue through 2022 as out-of-work consumer-members struggle to pay their electric bills and commercial and industrial customers buy less electricity because of sharp declines in oil, agriculture, tourism and other industries.

Based on current interest rates, NRECA estimates that co-ops could realize a net savings of $10.1 billion from repricing $42 billion of direct and guaranteed RUS loans held by about 500 co-ops. An average co-op with typical RUS debt could save $2 million a year in interest payments if it could take advantage of today’s rates.

The current 20-year U.S. Treasury interest rate is 1.17%. The rates that co-ops are paying varies, depending on when they obtained their loans from the U.S. Department of Agriculture’s RUS program. However, some co-ops are paying rates of more than 5%.

“While homeowners and other private businesses can refinance debt without penalties, RUS borrowers are still required to pay penalties for refinancing,” said Tracy Bensley, CEO of Talquin Electric Cooperative in Quincy, Florida. “We need for Congress to act so that our businesses, like any other business in America, can use these historically low interest rates to help our members, who desperately need any assistance they can receive right now.”

The three CEOs who participated in the media call said they have watched local unemployment rates rise dramatically and businesses struggle with falling revenue amid coronavirus restrictions.

“We’ve seen the unemployment rate more than double,” Bensley said. “Some of these businesses will probably not survive.”

Florida co-ops have almost $1.7 billion in RUS debt and could save more than $400 million over the life of their loans if Congress passes the legislation, Bensley said.

“At Talquin alone, we have about $88 million in RUS debt,” he said. “The Flexible Financing for Rural America Act could save Talquin Electric members between $27 million and $40 million, which equates to somewhere between $1.2 and $2.1 million annually.”

Suzanne Lane, CEO of Kansas Electric Power Cooperative Inc. in Topeka, said the debt repricing bill could save the generation and transmission co-op between $20 million and $25 million in interest on its $82 million in RUS debt.

Randy Hauck, general manager of Verendrye Electric Cooperative in Minot, North Dakota, said the $1 million a year his co-op could save by repricing its $60 million RUS debt would probably allow it to strengthen its infrastructure without having to raise members’ electric bills.

“Without load growth or reducing debt service payments, you cannot make those kinds of improvements,” Hauck said.

Matheson said he has not heard of any opposition to the RUS repricing bill. The legislation was introduced as a standalone bill in each chamber, but it has the best chance of being approved if it’s attached to the sweeping pandemic package, he said.

“The train that’s leaving the station is this broader coronavirus relief package,” he said. “It’s a wonderful opportunity to lay in the economic benefits for co-ops from today’s low interest rates.”

The lead sponsors of the bill are Reps. Tom O’Halleran, D-Ariz., and Vicky Hartzler, R-Mo., and Sens. John Hoeven, R-N.D., John Boozman, R-Ark., Tina Smith, D-Minn., and Kyrsten Sinema, D-Ariz.

Erin Kelly is a staff writer at NRECA.

Members of Congress introduced a bipartisan bill Thursday in both the House and Senate that could save electric cooperatives more than $10 billion by allowing them to reprice loans from the Rural Utilities Service at current low interest rates.

The legislation allows co-ops to receive rate adjustments on their existing RUS loans simply by asking the U.S. Department of Agriculture within 180 days of the bill’s enactment. The Flexible Financing for Rural America Act would waive any prepayment penalties normally associated with refinancing.

The new interest rate available to co-ops would be the U.S. Treasury rate that most closely matches the remaining term on the loan being repriced, said NRECA lobbyist Hill Thomas, who is leading the association’s efforts. Co-ops would receive that rate starting on the date they notify USDA of their repricing request, no matter how long it takes the government to process it.

Based on current interest rates, NRECA estimates that co-ops could realize a net savings of $10.1 billion from repricing $42 billion of direct and guaranteed RUS loans held by about 500 co-ops. An average co-op with typical RUS debt could save $2 million a year in interest payments if they could take advantage of today’s rates.

If approved by Congress, RUS loan repricing would provide much-needed relief to co-ops that have been hit hard by the financial impact of COVID-19. NRECA economists estimate that co-ops could lose up to $10 billion in revenue through 2022 as out-of-work consumer-members struggle to pay their electric bills and commercial and industrial customers buy less electricity because of sharp declines in areas like oil, agriculture and tourism.

“Economic development has been part of electric co-ops’ DNA for decades and that element of community leadership will be critical as communities rebound from the public health emergency,” NRECA CEO Jim Matheson said. “This essential legislation will give co-ops the flexibility to manage financial shortfalls and focus on the long-term stability of the communities they serve.

“America’s electric cooperatives face significant financial shortfalls due to the ongoing pandemic,” he said. “Despite that, electric cooperatives are working to help their communities by working with co-op consumer-members on extended payment plans, accelerating cash back programs, and expanding broadband access.”

NRECA lobbyists have worked to ensure electric cooperatives were included in the various COVID-19 relief packages that federal lawmakers have approved in recent months. The $2 trillion CARES Act, passed in March, included $900 million for the Low-Income Home Energy Assistance Program, which helps low- and moderate-income consumers pay their utility bills.

The lead sponsors of the bills introduced Thursday are: Reps. Tom O’Halleran, D-Ariz., and Vicky Hartzler, R-Mo., and Sens. John Hoeven, R-N.D., John Boozman, R-Ark., Tina Smith, D-Minn., and Kyrsten Sinema, D-Ariz.

“Electric cooperatives and telecommunications providers are critical to the quality of life in rural areas,” Hoeven said. “The restrictions on RUS loans hamper the ability of these organizations to cope with the challenges of COVID-19.”

O’Halleran said co-ops’ financial stability is crucial to rural America.

“Rural electric utility and telecommunications providers are working around the clock to keep families across America connected to telehealth, education, and loved ones during these difficult times,” he said.

Erin Kelly is a staff writer at NRECA.

Related Content:

Read More on the electric co-op response to the COVID-19 Pandemic

NRECA is asking Congress to provide federal aid to the nation’s 900-plus electric cooperatives, some of which may suffer from budget shortfalls as their consumer-members struggle to pay their electric bills during the COVID-19 pandemic.

Lawmakers are expected to consider another sweeping relief bill later this spring as a follow-up to the $2 trillion CARES Act they passed in March. That legislation contained several provisions sought by NRECA, including an additional $900 million for the Low-Income Home Energy Assistance Program, which helps some low-income and moderate-income consumers pay their utility bills. But not all struggling families qualify for that aid.

“Many states have mandated moratoriums on utility disconnections and some members of Congress have proposed a similar federal moratorium,” NRECA CEO Jim Matheson wrote in a letter to congressional leaders. “At the same time, electric bill nonpayment is increasing nationwide and electric load from commercial and industrial users has dramatically decreased.”

Matheson reminded lawmakers that co-ops are not-for-profit, have no shareholders and return excess revenue to their consumer-members. Co-ops returned $1.2 billion to their members in 2018 alone.

“Because of this structure and the desire to keep energy costs as low as possible, some electric co-ops have limited reserve margins to sustain high rates of nonpayment,” he wrote. “As a result of nonpayments and load falloff resulting from economic hardship, some not-for-profit electric cooperatives are facing significant operational shortfalls. Without federal assistance, co-ops may face severe financial distress.”

NRECA is also asking lawmakers to include federal loan, broadband and disaster relief provisions in the next bill, including measures to:

• Direct the U.S. Department of Agriculture’s Rural Utilities Service program to help co-ops save money immediately by taking advantage of historically low interest rates to reprice or refinance RUS debt without penalties for borrowers. Co-ops hold more than $40 billion in RUS electric program loans.
• Increase the amount of lending available under the RUS Guaranteed Underwriter Program. It provides guarantees for loans made to co-ops by private cooperative banks such as the National Rural Utilities Cooperative Finance Corp. (CFC) and CoBank.
• Provide vouchers for needy families and small businesses to pay their internet service providers. This would allow broadband providers, including co-ops, to keep customers connected and provide new connections. Service is especially crucial during the pandemic for online school assignments, teleworking and telemedicine.
• Invest more in existing programs such as the RUS ReConnect Broadband Loan and Grant Program to bring high-speed internet service to rural areas.
• Direct the Federal Emergency Management Agency to reimburse co-ops for past disasters. Some Florida co-ops, for example, still have not received FEMA reimbursements for rebuilding their systems after Hurricane Michael in 2018.

The letter was sent to Senate Majority Leader Mitch McConnell, R-Ky., Senate Minority Leader Chuck Schumer, D-N.Y., House Speaker Nancy Pelosi, D-Calif., and House Minority Leader Kevin McCarthy, R-Calif.

Erin Kelly is a staff writer at NRECA.

Read More on the electric co-op response to the COVID-19 Pandemic

See NRECA’s COVID-19 hub on cooperative.com for key resources for co-ops, including guidance on business continuity planning and communication, as well as event schedule changes.

ARLINGTON, Va. – Several provisions to modify tax policy and protect electric rates for the nation’s electric cooperatives are included in FY2020 spending legislation passed today by the U.S. Senate. The House passed the legislation on Tuesday. It now heads to the president’s desk to be signed into law.

The package includes:

• The bipartisan RURAL Act, which ensures that co-ops that accept government grants for storm restoration or broadband are not at risk of losing their tax-exempt status.  
• The SECURE Act, which will lower the premiums that electric co-ops pay to the Pension Benefit Guaranty Corporation for low-risk defined benefit pension plans.
• Repeal of the “parking lot tax,” which would have assessed taxes on about one-third of electric co-ops.
• Repeal of the 40% “Cadillac tax” on employer health plans that will help protect health care benefits for all co-op employees. 

“We’re grateful that Congress understands the importance of fixing a tax problem that threatens 900 electric co-ops and America’s rural communities,” said Jim Matheson, CEO at the National Rural Electric Cooperative Association. “This package preserves the electric cooperative business model, protects co-op members from unfair electric rate increases and provides certainty to co-ops that leverage federal and state grants to meet the needs of the communities they serve. In particular, we’re grateful to Sens. Rob Portman and Tina Smith and Reps. Terri Sewell and Adrian Smith for leading the RURAL Act through Congress.”

Key congressional sponsors echoed Matheson’s support for the RURAL Act’s inclusion in the spending package.

• Sen. Rob Portman, R-Ohio – “I’m pleased that this bipartisan legislation will now head to the president’s desk to be signed into law because in today’s technology-dependent world, we must do more to bring high-speed internet and stronger grid infrastructure to the rural areas of our country. Tax-exempt rural co-ops provide these important services to parts of the country where access to reliable electricity and high-speed internet is the most limited, and they rely heavily on grants to perform these services. Without this legislation, many co-ops may miss out on grant income or disaster assistance, hurting our efforts to promote economic development and job creation in these rural areas.”

• Rep. Terri Sewell, D-Ala. “Communities across my district rely on the services provided by rural electric cooperatives, including the deployment of rural broadband, energy to rebuild neighborhoods after natural disasters, and other economic development projects. Access to reliable, affordable broadband is especially important to my constituents in rural communities who depend on this connectivity for economic growth. By ensuring that government grants for these services don’t jeopardize the tax-exempt status of these cooperatives, today’s passage of the RURAL Act will preserve the ability for co-ops to continue providing these invaluable tools that boost local economies and support families across Alabama.”

• Sen. Tina Smith, D–Minn. “We should take any action we can to help us get more Minnesotans and Americans in rural areas connected. So when I heard from several Minnesota cooperatives at risk of losing their tax-exempt status, I wanted to reverse that. I introduced bipartisan legislation that would ensure co-ops can retain their tax exemptions in efforts to expand rural broadband or in providing relief from, or preparation for, a disaster or emergency. With this measure set to become law, we can make sure rural broadband keeps expanding in Minnesota and nationwide. I also want to thank the National Rural Electric Cooperative Association for being partners in this work from day one.”

• Rep. Adrian Smith, R-Neb. – “Rural communities across the country, including in Nebraska’s Third District, depend on public and cooperative power to provide affordable, reliable electricity. TCJA’s grant-related provisions were never intended to change the tax-exempt status of rural electric cooperatives, and enacting the RURAL Act makes that clear. Grants from agencies such as FEMA play a vital role in rural America, and this provision ensures a tax glitch doesn’t further stress communities as they recover from storms, earthquakes, wildfires, and other disasters. I am grateful to Rep. Sewell, Sen. Smith, Sen. Portman, our more than 350 cosponsors from the House and Senate, and cooperative members across the country for helping us ensure this vital fix becomes law.”

To maintain their tax-exempt status, co-ops may receive no more than 15 percent of their income from non-member sources. Historically, government grants were considered contributions to capital, not income. But the 2017 tax law inadvertently categorized grants as non-member revenue, threatening to push co-ops beyond the 15 percent threshold. The RURAL Act makes it clear that government grants will not threaten a co-op’s tax-exempt status.

The SECURE Act has been another major priority for electric co-ops this year.

“Electric co-op pension plans pose nominal risk of default, yet co-ops continue to pay PBGC premiums as if they were Fortune 500 companies with higher risk profiles,” said Matheson. “I applaud Congress for recognizing these important differences and passing this bill to save electric co-ops more than $30 million annually.”

NRECA offers retirement and health insurance benefits to co-op employees, including a defined benefit pension plan. More than 880 electric co-ops participate in the plan, which covers more than 56,000 employees in 48 states.

The National Rural Electric Cooperative Association is the national trade association representing more than 900 local electric cooperatives. From growing suburbs to remote farming communities, electric co-ops serve as engines of economic development for 42 million Americans across 56 percent of the nation’s landscape. As local businesses built by the consumers they serve, electric cooperatives have meaningful ties to rural America and invest $12 billion annually in their communities.

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Updated: Dec. 20, 2019

The $738 billion defense bill passed by Congress on Tuesday includes a provision allowing electric cooperatives that provide power to military bases or nearby communities to qualify for grants to improve their plants, transmission lines and other infrastructure.

The Senate voted 86-8 to approve the National Defense Authorization Act, which empowers the Pentagon to spend money in fiscal year 2020. The House passed the bill 377-48 on Dec. 11. President Trump has signed it into law.

The co-op provision contained within the sweeping bill amends the definition of “community infrastructure” to permit co-ops to participate in the Defense Community Infrastructure Pilot Program. Previously, only states and local governments could qualify for grants from the program, which is designed to boost the resiliency of military installations and surrounding communities by improving utilities, roads, schools and other important infrastructure.

Rep. Xochitl Torres Small, D-N.M., who championed the co-op provision, said co-ops “are a vital partner to the military installations they serve” and need access to the Defense Department grants to help ensure they stay that way.

“We will hinder the readiness and resiliency of those installations if we do not provide co-ops with the same resources to maintain and upgrade their electrical infrastructure,” the congresswoman said at a House hearing earlier this year.

Co-ops serve more than 90 military bases and other DOD facilities in 38 states, according to NRECA research. They also own, operate and maintain the electric distribution grid at 24 military installations—bases and other facilities—through their utility privatization contracts. Nearly a third of the Army and Air Force utility privatization contracts for electricity are held by co-ops.

The final defense bill fails to include another NRECA priority: the USE IT Act. That legislation would have made it easier for co-ops to get federal approval for carbon capture, utilization and sequestration projects to reduce the amount of carbon dioxide in the atmosphere_. The original Senate version of the bill included the USE IT Act, but it was removed during negotiations between the Senate and House that produced the final compromise.

Basin Electric Power Cooperative CEO Paul Sukut told a Senate panel in February that the USE IT Act would help co-ops develop technology to capture CO₂ emissions from coal-fired power plants and turn them into useful products. The bill’s sponsors plan to continue to push for the legislation’s passage in this session of Congress.

The defense bill also eliminates the current Electromagnetic Pulse (EMP) Commission—an action that NRECA supports.

It largely codifies an executive order issued by Trump in March calling for a government-wide effort to prepare for and mitigate the national security threat from EMPs and geomagnetic disturbances, known as GMDs. It also calls for the government to work with electric utilities and other industries to address potential threats.

EMPs are caused by the detonation of a nuclear device miles above the Earth and can affect electronics within its impact area. GMDs can be caused by solar flares hitting the Earth, primarily affecting the electric and telecommunication sectors if the flares’ currents travel along the utility wires.

Erin Kelly is a staff writer at NRECA.

ARLINGTON, Va. – Several provisions to modify tax policy and protect electric rates for the nation’s electric cooperatives were included in FY2020 spending legislation passed today by the U.S. House of Representatives.

The package includes:

• The bipartisan RURAL Act, which ensures that co-ops that accept government grants for storm restoration or broadband are not at risk of losing their tax-exempt status.  
• The SECURE Act, which will lower the premiums that electric co-ops pay to the Pension Benefit Guaranty Corporation (PBGC) for low-risk defined benefit pension plans.
• Repeal of the “parking lot tax,” which would have assessed taxes on roughly one-third of electric co-ops across the nation. 

“We’re thrilled and thankful that Congress recognizes the importance of addressing the taxing problems that could handcuff electric co-ops and America’s rural communities,” said National Rural Electric Cooperative Association (NRECA) CEO Jim Matheson. “This package preserves the fundamental nature of the electric cooperative business model and will save electric co-ops tens of millions of dollars each year. Moreover, it protects co-op members from unfair increases in their electric rates and provides certainty to co-ops that leverage federal and state grants for economic development, storm recovery and rural broadband deployment. We’re grateful to Sens. Rob Portman and Tina Smith along with Reps. Terri Sewell and Adrian Smith for shepherding this bill through Congress.”

To maintain their tax-exempt status, co-ops may receive no more than 15 percent of their income from non-member sources. Historically, government grants were considered contributions to capital, not income. But a glitch in the 2017 tax law inadvertently categorized grants as non-member revenue, threatening to push co-ops beyond the 15 percent threshold. The RURAL Act makes it clear that government grants will not threaten a co-op’s tax-exempt status.

The SECURE Act has been another major priority for electric co-ops this year.

“Electric co-op pension plans pose nominal risk of default, yet co-ops continue to pay PBGC premiums as if they were Fortune 500 companies with higher risk profiles,” said Matheson. “I applaud the House for recognizing these important differences and passing this bill to save electric co-ops more than $30 million annually.”

NRECA offers retirement and health insurance benefits to co-op employees, including a defined benefit pension plan. More than 880 electric co-ops participate in the plan, which covers more than 56,000 employees in 48 states.

The National Rural Electric Cooperative Association is the national trade association representing more than 900 local electric cooperatives. From growing suburbs to remote farming communities, electric co-ops serve as engines of economic development for 42 million Americans across 56 percent of the nation’s landscape. As local businesses built by the consumers they serve, electric cooperatives have meaningful ties to rural America and invest $12 billion annually in their communities.

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Updated: Dec. 20, 2019

Congress on Thursday passed the RURAL Act, protecting more than 900 electric cooperatives throughout the nation from the risk of losing their tax-exempt status when they accept government grants for disaster relief, broadband service and other programs that benefit co-op members.

The Senate’s vote to approve the legislation came two days after the House approved it as part of a sweeping tax and spending package. President Trump has signed it into law.

The RURAL Act was NRECA’s top legislative priority for the year because of the profound threat to the business model of not-for-profit co-ops. Tens of thousands of co-op leaders, employees and members across the country rallied to advocate passage of the bill.

“This package preserves the fundamental nature of the electric cooperative business model and will save electric co-ops tens of millions of dollars each year,” said CEO Jim Matheson. “Moreover, it protects co-op members from unfair increases in their electric rates and provides certainty to co-ops that leverage federal and state grants for economic development, storm recovery and rural broadband deployment.”

Lawmakers passed the popular bipartisan legislation in the final hours of the 2019 session as part of a larger tax and spending bill that funds the government through September 2020.

More Spending Bill News: Congress Saves Co-ops Millions in Pension Costs, Repeals ‘Cadillac Tax’

The bill’s passage fixes a problem created in 2017 when Congress passed the Tax Cuts and Jobs Act, which redefined government grants to co-ops as income rather than capital. That change made it difficult for many co-ops to abide by the 15% limit on non-member income to keep their tax-exempt status. The RURAL Act once again exempts grants from being counted as income and is retroactive to the 2018 tax year.

Without the fix, some co-ops would have had to start paying taxes this spring after receiving grants in 2018 or 2019 to repair storm damage, bring high-speed internet to rural communities or invest in renewable energy and energy-efficiency programs. Many co-op leaders feared they would have to raise rates for members to pay the new taxes.

The legislation attracted more than 300 co-sponsors in the 435-member House and nearly two-thirds of the senators. The effort was led in the House by Reps. Terri Sewell, D-Ala., and Adrian Smith, R-Neb., and in the Senate by Rob Portman, R-Ohio, and Tina Smith, D-Minn.

NRECA lobbyist Paul Gutierrez credited the victory to a collaborative campaign strategy that included co-ops’ grassroots efforts to alert their senators and representatives to the issue.

“This was an amazing NRECA team and membership effort, including co-op members at the end of the line,” he said. “We had great legislative champions in the House and Senate, and they worked tirelessly to get this included in the final tax package.”

Previous coverage of the RURAL Act:

Co-op Voices, Part 1: How Losing Tax-Exempt Status Would Hurt Rural Residents

Co-op Voices, Part 2: CEOs Discuss Impacts of Tax Law Glitch for Members

As Majority of House Signs On to RURAL Act, Lead Sponsors Press for Vote

Q&A: Senate’s Lead RURAL Act Sponsors Discuss Their Strategy for Passage

Q&A: RURAL Act’s Lead House Sponsors Say Co-op Voices Are Key to Bill’s Success

Co-op CEO to Congress: Help Expand Rural Broadband by Passing RURAL Act

NRECA CEO Jim Matheson: ‘If We All Stand Up,’ Co-ops Can Save Tax-Exempt Status

Erin Kelly is a staff writer at NRECA.

Updated: Dec. 20, 2019

Electric cooperatives could save more than $30 million a year in pension insurance premiums thanks to a sweeping government funding bill passed Thursday by Congress.

The legislation also repeals the so-called “Cadillac tax” imposed by the Affordable Care Act on health care benefits that co-ops and other employers provide for their workers.

The Senate voted Thursday to pass the bill, which was approved Tuesday by the House. President Trump has signed it into law.

NRECA has been advocating reform of the pension issue for several years, and passage of the bipartisan SECURE Act was a top priority for 2019. Nearly 2,000 co-op leaders lobbied Congress on the issue earlier this year as part of NRECA’s Legislative Conference.

The bills that provide relief to co-ops on both the pension and health care issues were approved by lawmakers as part of a broader legislative package that funds the federal government through September 2020.

More Spending Bill News: Congress Passes RURAL Act

“I applaud Congress for recognizing important differences in our pension plans and passing this bill to save electric co-ops more than $30 million annually,” said NRECA CEO Jim Matheson. “Our pension plan helps co-ops attract and retain qualified employees for the future, while promoting economic security for retirees.”

Rep. Ron Kind, D-Wis., one of the lead sponsors of the SECURE Act, said the bill would “immediately and permanently” reduce pension premiums for co-ops starting this year.

The House passed the SECURE Act 417-3 in May, but it stalled in the Senate until a larger government-funding deal was reached.

The SECURE Act adjusts the formula that determines what certain co-ops and other not-for-profit organizations must pay to the Pension Benefit Guaranty Corp. The decrease in premiums for co-ops that participate in the NRECA Retirement Security Plan reflects the extremely low risk that they will default on their pension payments.

The PBGC is an independent federal agency created by Congress in 1974 to guarantee that American workers would receive their retirement benefits even if their employers went bankrupt. It is funded by employers who pay premiums to insure their workers’ pensions.

However, co-ops and charity groups were forced, beginning in 2006, to subsidize large, for-profit Fortune 500 corporations that have pensions at much greater risk of going bankrupt, said NRECA lobbyist Christopher Stephen.

“This victory demonstrates the strength of our network and enables our members to focus resources on their core mission to provide affordable, reliable and sustainable services to their consumer-members,” Stephen said.

More than 880 co-ops participate in the NRECA retirement plan, which covers more than 56,000 employees in 47 states.

In addition to Kind, the SECURE Act’s lead sponsors were House Ways and Means Chairman Richard Neal, D-Mass., and Reps. Kevin Brady, R-Texas, and Mike Kelly, R-Pa. In the Senate, similar legislation was championed by Finance Committee Chairman Chuck Grassley, R-Iowa, and Ron Wyden of Oregon, the panel’s senior Democrat.

The separate “Cadillac tax” issue was created by the 2010 passage of the Affordable Care Act, better known as Obamacare. It was set to impose a 40% excise tax on employer-sponsored health care plans that are considered “high cost,” including those offered by co-ops through the NRECA group benefits program.

Congress previously signaled its dislike for the “Cadillac tax” by delaying it from taking effect four times. It was set to begin in 2022 if lawmakers hadn’t acted.

Co-ops provide health insurance benefits to more than 100,000 employees, retirees and their families.

NRECA has been a leader in supporting a full repeal of the tax. Taxing any part of co-op employees’ health care benefits would have resulted in less comprehensive health coverage for families at a higher cost to them, Stephen said.

 “No cooperative, whether they get health insurance through NRECA’s benefit plans or from another source, should be penalized for doing the right thing for their employees just because our members live in rural communities where limited access can drive the cost disproportionately higher than in urban areas,” he said.

Erin Kelly is a staff writer at NRECA.

After years of dealing with roller-coaster diesel prices, Inside Passage Electric Cooperative in southeast Alaska is investing in hydropower to lower rates for its 1,300 members and bring cleaner energy to the rural communities it serves.

The co-op’s latest project will turn an unused dam on the remote island village of Kake into a source of power for about 600 people, many of them Alaska Natives. It’s the second hydropower project undertaken by IPEC, which plans another two as it moves toward 70% renewable energy.

But the nearly $7 million in state and federal grants that are helping the Juneau-based co-op reach its goals could also strip the not-for-profit business of its tax-exempt status and thwart its effort to reduce rates.

That’s because a 2017 tax bill passed by Congress redefined government grants to co-ops as non-member income, making it difficult for co-ops to avoid going over the 15% limit on outside revenue to keep their tax-exempt status. If they must start paying taxes, many co-ops will be forced to raise electric rates—often in high-poverty communities that can least afford higher energy costs.

“We’re trying to reduce fossil fuel consumption and reduce rates to our members,” said IPEC CEO Jodi Mitchell. “Now this tax issue is going to undo all the good we’ve tried to do. It’s very unfair that we’re being punished for trying to do the right thing. Congress has just got to fix it.”

Mitchell and leaders at the nation’s electric co-ops are urging lawmakers to vote before year’s end to pass the RURAL Act, a bipartisan bill that would allow co-ops to accept grants without risking their tax-exempt status. The legislation had 280 House co-sponsors and 45 in the Senate as of Nov. 12.

Co-op leaders hope that IPEC’s situation, and the stories that follow, will shed light on the harmful impact of the tax law on rural residents:

Hurricane Recovery in Texas

When Hurricane Harvey slammed into Texas with 130 mph winds and more than 20 inches of rainfall, it knocked out power to all 22,467 meters served by Victoria Electric Cooperative. With help from 300 employees of neighboring co-ops and contractors, the co-op restored electricity to 95% of its service area within 10 days. More than 630 poles and nearly 260 transformers had to be replaced.

The co-op’s recovery efforts after the 2017 storm were aided by the Federal Emergency Management Agency, which provided more than $8 million in disaster relief this year. To qualify for those funds, the co-op had to spend about $890,000 of its own money and take out loans for about $420,000 more, costing members a total of about $1.3 million.

By accepting the FEMA grants to restore its system, Victoria EC is facing the loss of its tax-exempt status and a tax liability that could be as much as $850,000.

At its recent annual meeting, about 150 co-op members signed up to support the RURAL Act, said CEO Blaine Warzecha. But so far, Texas Republican Sens. John Cornyn and Ted Cruz have not signed on as co-sponsors of the bill.

“Without the FEMA grants, we’d still have had to repair the system,” Warzecha said. “We would already have had to have a rate increase, no doubt about it … Now we may have to have one anyway to pay for our taxes. Our members are going to end up footing the bill unless we get help from Congress.”

Broadband Service in Tennessee

Forked Deer Electric Cooperative in Halls, Tennessee, was thrilled to learn in October that it was the first recipient in the nation of a rural broadband grant from the U.S. Department of Agriculture’s new ReConnect program.

But the co-op’s joy faded when leaders realized that the $2.8 million grant might cost them their tax-exempt status.

“We’re all excited, and then a week later I get a call from one of my colleagues asking me what we’re going to do about the tax issue,” said CEO Jeff Newman. “I said, ‘What are you talking about?’ When he told me, it was a real punch in the gut.”

Newman said the co-op wants to use the federal grant to bring high-speed internet service to the part of its service area that is the most sparsely populated and the least connected. Now he is trying to figure out a way to draw down the grant money more slowly, so that it won’t push the co-op over the 15% limit for non-member revenue in any one year.

“All of our members have these high hopes for broadband, and we don’t want to let them down,” he said. “A middle-aged woman came into our office the other day and cried because she can now do online schooling and change her lot in life. We’re realizing broadband has life-changing impacts for our members … We don’t need obstacles from the federal government.”

Building a Stronger System in Oklahoma

After a brutal ice storm in 2017, it took 30 days for Northwestern Electric Cooperative in Woodward, Oklahoma, to restore power, with 400 lineworkers from throughout the region working around the clock. More than 6,000 poles and 100 miles of wire had gone down in the storm.

The FEMA aid that the co-op received to help restore power came before the tax law change, so it didn’t affect the co-op’s tax-exempt status. But the co-op is now at risk because this year it began receiving nearly $54 million in FEMA grants for a $72 million, three-year project to strengthen its system so that it will be better able to withstand future storms. CEO Tyson Littau said the grants will put the co-op over the 15% non-member limit.

“Do we rebuild and try to strengthen our distribution system and pay the taxes, or do we delay the mitigation project that would improve 1,200 miles of line throughout our territory?” he said. “I think we have a responsibility to the membership to improve the system for the future.”

Snowstorm Recovery in Oregon

When a record-breaking snowstorm hit Oregon in late February, Lane Electric Cooperative in Eugene sustained $5.6 million in damage to a system that serves 10,000 members.

With the help of FEMA grants, the co-op will rebuild its system and make it more resilient against future threats, said CEO Debi Wilson. But the co-op could also lose its tax-exempt status in the process, she said. Lane is currently working with tax advisers to see what tax liability it might face and whether a rate hike will be needed, Wilson said.

“We need things to go back to the way they were before the 2017 tax law,” she said. “Right now, FEMA funds aren’t functioning the way they were intended. They are supposed to take the burden off of our members, not add to their burden.”

Read more coverage of the RURAL Act:

Co-op Voices, Part 1: How Losing Tax-Exempt Status Would Hurt Rural Residents

RURAL Act: Why Popular, Bipartisan Legislation Can Face Hurdles in Congress

Q&A: Senate’s Lead RURAL Act Sponsors Discuss Their Strategy for Passage

As Majority of House Signs On to RURAL Act, Lead Sponsors Press for Vote

Q&A: RURAL Act’s Lead House Sponsors Say Co-op Voices Are Key to Bill’s Success

Co-op CEO to Congress: Help Expand Rural Broadband by Passing RURAL Act

NRECA CEO Jim Matheson: ‘If We All Stand Up,’ Co-ops Can Save Tax-Exempt Status

Co-op Advocacy Needed to Move Vital Tax Fix in Congress

Bipartisan Bill Would Protect Co-ops From Losing Tax-Exempt Status

Listen to a recent podcast on the RURAL Act:

Erin Kelly is a staff writer at NRECA.

Line loss—the electricity lost in a conductor during transmission and distribution—is a common problem for many electric co-ops, including Mora-San Miguel Electric Cooperative.

Each year, line loss at the Mora, New Mexico, co-op averages 8% to 12% of power purchased because of inefficiencies or defects in its distribution system, according to Les Montoya, CEO and general manager.

“The difference between what we sell versus what we receive is a concern,” said Montoya. “We are working to ensure we recover sales on all the power we purchase.”

The co-op will use part of a $7.3 million loan from the U.S. Department of Agriculture to correct those portions of its distribution system. The loan also will help pay for other improvements in its 2,000 miles of lines, serving about 11,500 members in four counties.

Mora-San Miguel EC is one of 27 co-op recipients of more than $1.4 billion in new loans from USDA. The money, announced Nov. 1 through USDA’s Electric Loan Program, will help co-ops build or improve 6,886 miles of line in rural areas.

“Modern and reliable electric infrastructure has been a cornerstone to rural prosperity since the Rural Electrification Act of 1936,” Agriculture Secretary Sonny Perdue said in a statement. “This funding we are providing is critical to rural communities…When rural America thrives, all of America thrives.”

The loans include nearly $256 million for investments in smart grid infrastructure that uses digital communications technology to detect and react to local changes in electricity use.

For example, Haywood EMC will use part of its $24 million loan to finance smart grid technologies that will benefit about 27,000 members in North Carolina, South Carolina and Georgia. The loan will help the Waynesville, North Carolina, co-op upgrade its radio system from analog to digital and improve protection and reliability at four substations, said Thomas Batchelor Jr., executive vice president and CEO.

Victoria A. Rocha is a staff writer at NRECA.

More than a third of senators have now signed on to support the RURAL Act, a bipartisan bill by Sens. Rob Portman, R-Ohio, and Tina Smith, D-Minn., to protect electric cooperatives’ tax-exempt status.

As of Monday, 38 senators were co-sponsoring the bill, which would allow not-for-profit co-ops to accept government grants for disaster relief, broadband service and other priorities without losing their tax-exempt status.

In the House, 269 members have signed on to the bill, led by Reps. Terri Sewell, D-Ala., and Adrian Smith, R-Neb.

The RURAL Act would fix a problem created by the 2017 Tax Cuts and Jobs Act, which began counting grants as non-member income for co-ops. Under federal law, co-ops must receive at least 85% of their income from consumer-members to remain tax-exempt. Before the law took effect in 2018, grants were considered capital and did not affect co-ops’ tax status.

Unless Congress passes the RURAL Act, co-ops may be forced to pay the new tax by raising rates for their consumer-members, many of whom live in high-poverty areas.

The Joint Committee on Taxation estimated last week that the bill would cost the U.S. Treasury $3.4 million a year in lost taxes for 10 years—a tiny amount for a federal budget that is nearly $5 trillion.

Portman and Smith talked about their strategy for passing the bill and explained why it’s important to rural Americans.

What are the biggest challenges/obstacles to getting the bill passed in the Senate this year?

Portman: To be honest, the biggest challenge we face is whether the Senate will be able to work with the House to pass any significant tax legislation this year. This is especially true for any legislation building upon the monumental tax reform of 2017. While the RURAL Act actually goes beyond their pre-tax reform treatment by simplifying the treatment of governmental grants and assistance received by co-ops, this bipartisan legislation is still getting caught up in the partisan politics of tax reform. Ultimately, I am optimistic that the strong bipartisan nature of this legislation will help clear the path through the partisan discussions around tax policy in Congress today.

Smith: Passing legislation in today’s polarized political climate is never easy. There are several bills to correct problems with the 2017 Republican tax bill that have been caught up in negotiations over other tax measures. However, I’m hopeful that we can now make meaningful progress toward an agreement that addresses the problems with the 2017 tax bill and some of the corrections and other middle-class tax relief provisions that should have been included in that bill.    

The House now has more than a majority of its members signed on as co-sponsors of the bill. If the House can pass the RURAL Act with a strong bipartisan majority, would that help you convince a majority of senators to take up and pass the bill?

Portman: We also have significant support in the Senate…more than a third of the Senate. But yes, a strong bipartisan majority, and hopefully an even stronger bipartisan vote in the House, would provide a clear signal to my colleagues that the RURAL Act is a common-sense fix to the tax code.

Smith: We have a strong bipartisan coalition in the Senate and with stakeholders across the nation. We’re pushing to get this across the finish line as soon as we can, but to do so, senators will need to continue to hear from their constituents about this bill.   

What do you see as the best strategy to pass it?

Portman: As much as I think that the widespread bipartisan support in both the House and Senate make a strong argument for passing the RURAL Act on a standalone basis, Congress very rarely passes standalone tax bills. It’s most likely that this bill becomes part of a broader tax package that rides along with a must-pass piece of legislation, hopefully in the coming months.

Smith: I believe that the most important thing to getting this bill passed is to make sure that senators and members of Congress hear from their constituents about why this issue is so important. When you make your voices heard, you have an incredible ability to effect the kinds of changes you seek.    

What do you think are the most effective arguments you have when you’re asking other senators to co-sponsor the bill or when you’re asking leadership to bring it to the floor?

Portman: There are few issues that unite my colleagues more than expanding access to rural broadband. No matter what part of the country you’re from, there’s a good chance that parts of your state wouldn’t have access to high-speed, reliable internet without the services provided by tax-exempt rural co-ops. Any legislation that ensures co-ops will continue expanding these broadband services should be an easy bill for my Senate colleagues to support.

Smith: Most of my colleagues I speak with understand just how vital rural electric cooperatives are to rural communities…For many decades, this tax-exempt business model has ensured that hundreds of Minnesota rural communities—and thousands across the country—have affordable, reliable power and the significant economic benefits that come with it. It wasn’t the intent of the 2017 tax law change to jeopardize rural electric cooperatives’ tax-exempt status.

How will your rural constituents be hurt if their co-ops lose their tax-exempt status?

Portman: The Ohio electric co-ops provide electricity and broadband services to more than 380,000 of my constituents, covering 77 of Ohio’s 88 counties and some of the most rural areas of the state. If just one of these co-ops were to lose their tax-exempt status, the Ohioans they serve would almost immediately feel the squeeze as the co-op would be forced to raise their rates in order to afford the new tax payments. For a lot of families and individuals in the rural areas of my state, even a small increase in the cost of necessities such as electricity and broadband could make a world of difference in their financial security. We can’t let that happen, which is why Congress should pass the RURAL Act as soon as possible.

Smith: Many cooperatives in Minnesota and across the country are in danger of being forced to choose between keeping their tax exemptions and accepting an important grant to clean up a disaster or to expand broadband services. The resulting costs to cooperatives could force up electricity rates for customers and make cooperatives think twice about accepting grants that could help their communities.

How can co-op leaders and members in your state and throughout the nation best help you pass the legislation?

Portman: As far as Ohio goes, I’m very pleased with the grassroots effort by the Ohio co-ops to encourage the delegation to support the bill. Last I checked, there’s only one more House member out of 16 that hasn’t co-sponsored, and I’m hopeful [Sen. Sherrod] Brown will support the bill as well. Even outside of Ohio, I have to say I’m very impressed by the grassroots effort across the board…

But you shouldn’t take that as a sign to let up, either. Whether it’s in Ohio or any other state, it is crucial that everyone continue to reach out to their representative or senator to talk about the importance of the bill and the potential consequences of a co-op losing its tax-exempt status. With your help, I’m confident that we can continue growing support for the bill and have a chance at passing it this year.

Smith: You should make your voices heard by your representatives in Washington. Senators and members of Congress care deeply about what’s important to their constituents, and I’m hopeful that you will be able to play a key role in getting them to accept a tax package that addresses this problem and the other key tax priorities that Congress needs to address.  As we come to the end of the tax year, I plan to make it clear to my colleagues that we can’t continue to allow our tax laws to hinder our nation’s electric cooperatives from doing the important work of powering our rural communities and supporting jobs and economic development. I’ll be pressing [Senate Majority Leader Mitch] McConnell to reach a fair agreement that allows this bill and other important tax priorities to be addressed. 

Read more coverage of the RURAL Act:

RURAL Act: Why Popular, Bipartisan Legislation Can Face Hurdles in Congress

As Majority of House Signs On to RURAL Act, Lead Sponsors Press for Vote

Co-op Voices, Part 1: How Losing Tax-Exempt Status Would Hurt Rural Residents

Co-op Voices, Part 2: CEOs Discuss Impacts of Tax Law Glitch for Members

Q&A: RURAL Act’s Lead House Sponsors Say Co-op Voices Are Key to Bill’s Success

Co-op CEO to Congress: Help Expand Rural Broadband by Passing RURAL Act

NRECA CEO Jim Matheson: ‘If We All Stand Up,’ Co-ops Can Save Tax-Exempt Status

Co-op Advocacy Needed to Move Vital Tax Fix in Congress

Bipartisan Bill Would Protect Co-ops From Losing Tax-Exempt Status

Listen to a recent podcast on the RURAL Act:

Erin Kelly is a staff writer at NRECA.

Within the next few years, the 14 substations at Meeker Cooperative Light and Power Association will be able to communicate with each other.

The Litchfield, Minnesota, electric co-op will use a $7.1 million loan from the U.S. Department of Agriculture to install a fiber backbone that will enable two-way communications between the substations and headquarters. The funds are a portion of the $22 million the co-op received from USDA’s Electric Loan Program to improve its distribution system.

Once the fiber project is completed in 2022, it “will keep us better informed on whether the problem is at the substation or further down the line,” said Tim Mergen, CEO and general manager at the co-op.

“Right now, we check problems in person or rely on radio frequency that will send us a reading,” he said. “We still have to a send a crew to manually correct the problem.”

Meeker is one of 11 co-op recipients of more than $249 million in new loans from USDA.  

The money, approved Oct. 9 through USDA’s Electric Loan Program, will help co-ops build or improve 1,971 miles of power lines and finance smart grid technologies. About 231,000 residents and businesses in 12 states will benefit from the improved rural electric infrastructure.

“These investments in essential electric grid upgrades help to improve the quality of life in rural communities, create rural jobs and strengthen America’s economy,” said Donald “DJ” LaVoy, deputy undersecretary for rural development, in announcing the loans.

Not all the loan recipients were co-ops. In Maine, a solar investor will use a $1.7 million loan to work with wastewater districts on installations in two counties.

Victoria A. Rocha is a staff writer for NRECA.

A majority of House members are now co-sponsoring the RURAL Act, increasing the prospects for passage of the bipartisan bill this year.

As of Monday, 230 lawmakers had signed on to the bill to protect electric cooperatives’ tax-exempt status. It would take a simple majority of 218 of the 435 House members to pass it once the chamber’s leaders bring it to the floor for a vote.

“We will now be working with our congressional champions to move this legislation as part of a larger tax package or must-pass legislation,” said Paul Gutierrez, NRECA’s lead lobbyist on the issue.

Congress is expected to pass legislation in November to avert a government shutdown, giving RURAL Act sponsors one possible vehicle on which to attach the bill.

“We know that the most direct way to get something like this done is to include it in a must-pass spending bill,” said Rep. Terri Sewell, D-Ala., lead sponsor of the bill along with Rep. Adrian Smith, R-Neb.

Sewell said that attracting so many co-sponsors in the House means that passing the RURAL Act “will become a no-brainer.”

The RURAL Act would allow co-ops throughout the nation to once again accept government grants for disaster relief or broadband service without risking their tax-exempt status.

Currently, co-ops face the loss of that status if they accept any kind of grant from local, state or federal governments. The dilemma grew out of a 2017 tax reform bill passed by Congress that changed the definition of “non-member revenue” to include government grants. Co-ops are barred by federal tax law from receiving more than 15% of their revenue from sources other than their members. Before the change, grants were considered capital and did not factor into co-ops’ revenue ratios.

Co-op leaders, consumer-members and NRECA lobbyists have mounted a full-scale campaign to gain support for the RURAL Act since it was introduced in Congress in April. If the House votes to pass it, the focus would move to the Senate, where the bill has so far attracted 29 bipartisan co-sponsors led by Sens. Rob Portman, R-Ohio, and Tina Smith, D-Minn.

The bill faces a tougher test in the Senate because of partisan differences. However, supporters of the RURAL Act believe that its passage in the House by a strong bipartisan majority could convince Senate leaders of both parties to take it up.

The biggest challenge for the bill’s supporters is that time is running out on the 2019 legislative calendar. There are fewer than 30 days left on the House schedule and fewer than 40 on the Senate schedule.

Read more coverage of the RURAL Act:

Co-op Voices, Part 1: How Losing Tax-Exempt Status Would Hurt Rural Residents

Co-op Voices, Part 2: CEOs Discuss Impacts of Tax Law Glitch for Members

RURAL Act: Why Popular, Bipartisan Legislation Can Face Hurdles in Congress

Q&A: RURAL Act’s Lead House Sponsors Say Co-op Voices Are Key to Bill’s Success

Q&A: Senate’s Lead RURAL Act Sponsors Discuss Their Strategy for Passage

Co-op CEO to Congress: Help Expand Rural Broadband by Passing RURAL Act

NRECA CEO Jim Matheson: ‘If We All Stand Up,’ Co-ops Can Save Tax-Exempt Status

Co-op Advocacy Needed to Move Vital Tax Fix in Congress

Bipartisan Bill Would Protect Co-ops From Losing Tax-Exempt Status

Listen to a recent podcast on the RURAL Act:

Erin Kelly is a staff writer at NRECA.

High-speed internet service “is vital to the survival and growth” of rural America, but a recent tax law change makes it harder for electric cooperatives to bring broadband to their communities, a co-op CEO told a key congressional committee Friday.

“We desperately need help fixing our federal tax code before the end of 2019,” said Tim Johnson, CEO of Otsego Electric Cooperative in Hartwick, New York. Johnson testified before the House Small Business Committee at a field hearing on rural broadband in Hudson, New York.

Unless Congress acts this year, Otsego and other not-for-profit co-ops throughout the nation could lose their tax-exempt status when they take federal, state or local grants to bring broadband service to rural residents. It also affects co-ops that accept grants to restore power after a natural disaster, invest in local economic development, or create energy efficiency or renewable energy programs.

Congress created the dilemma in 2017, when it passed the Tax Cuts and Jobs Act. The sweeping new law redefined government grants to electric and telephone co-ops as “non-member” income. Under federal tax law, no more than 15% of a co-op’s income may come from sources other than its consumer-members. Co-ops that exceed that amount can lose their tax-exempt status and be forced to pay federal and state income taxes. Before the change, government grants were considered capital and were not counted as part of a co-op’s income mix.

“For OEC, the train had already left the station when the tax bill arrived,” Johnson told the committee in written testimony. “Prior to the enactment of the new law and the discovery of its unintended consequences on our tax-exempt status, our cooperative was awarded $10 million from New York’s state broadband program plus nearly $4.3 million in federal funds over the next decade to extend broadband to well over 2,000 rural homes and businesses.”

After learning what Congress had done, Otsego EC’s board decided to “forge ahead” with its plans to bring broadband to all its members, Johnson said.

“We view access to reliable broadband as an essential basis for quality of life and economic development in our entire cooperative community,” he said.

Rep. Antonio Delgado, D-N.Y., who led the field hearing, said “small businesses, families, schools and health care providers in rural communities across upstate suffer daily from a lack of access to broadband due to lack of investment in broadband infrastructure.”

“We must take swift action to close the digital divide between our urban and rural communities,” Delgado said. “I hope that today’s discussion will shed light on ways to improve broadband in rural areas.”

Johnson said Otsego EC will lose its tax-exempt status if Congress does not pass a tax-fix bill by the end of this year.

“What’s more, as much as 30% of the grant money received could be lost to taxes,” he said. “The combined penalties of paying income tax on grant funds and the loss of tax-exempt status will significantly reduce our ability to build broadband to as many locations as we originally projected, depriving many households of the intended and direct benefits of public grant funding for the broadband project. This is clearly not good public policy and the inadvertent mistake that has caused this situation must be fixed.”

Johnson urged lawmakers to pass the RURAL Act, a bipartisan bill that would allow co-ops to once again accept government grants without risking their tax status.

“OEC, along with the entire rural electric cooperative family and various rural-focused organizations such as Farm Bureau and the National Cooperative Business Association, are urging Congress to pass this legislation,” he said.

Johnson told the committee about other impediments to providing broadband, including the lack of detailed, accurate federal data about which communities do and don’t have service.

“More granular and accurate maps showing broadband availability are a key part of reaching all rural Americans with high-speed broadband service,” he said. “This will enable us to clarify existing gaps in coverage and harmonize the diverse solutions that will be required to help rural Americans keep pace with their urban counterparts.”

Since co-ops are nonprofit businesses that operate at cost, they will continue to need public investment—including government grants—to bring broadband to rural areas, Johnson said.

“Rural electric cooperatives are uniquely suited to partner with the government for these projects because of the existing infrastructure we have in place throughout our service areas,” he said. “As member-owned, locally operated and democratically controlled entities, we feel we can best determine the needs of our local service areas because our consumer-members have a direct say in the services we provide. We will continue serving these areas we call home long after other companies have reduced the quality of their service or ceased investment altogether.”

Read more coverage of the RURAL Act:

As Majority of House Signs On to RURAL Act, Lead Sponsors Press for Vote

RURAL Act: Why Popular, Bipartisan Legislation Can Face Hurdles in Congress

Co-op Voices, Part 1: How Losing Tax-Exempt Status Would Hurt Rural Residents

Co-op Voices, Part 2: CEOs Discuss Impacts of Tax Law Glitch for Members

Q&A: RURAL Act’s Lead House Sponsors Say Co-op Voices Are Key to Bill’s Success

Q&A: Senate’s Lead RURAL Act Sponsors Discuss Their Strategy for Passage

NRECA CEO Jim Matheson: ‘If We All Stand Up,’ Co-ops Can Save Tax-Exempt Status

Co-op Advocacy Needed to Move Vital Tax Fix in Congress

Bipartisan Bill Would Protect Co-ops From Losing Tax-Exempt Status

Listen to a recent podcast on the RURAL Act:

The record-setting snowstorm that walloped Oregon last February was so severe it turned off the lights to all of Douglas Electric Cooperative’s members for the first time in the co-op’s 80-year history.

“We’d never had a 100% outage before,” said Keith Brooks, general manager of the Roseburg-based co-op. “It took about three and a half weeks to get everyone’s power back on.”

Full recovery for the co-op has taken much longer.

Douglas Electric is struggling to pay for $10 million in storm damage, including the loss of nearly 400 power poles and 105 miles of wire, Brooks said. The co-op had to hire about 150 contract workers to help its 35 employees restore power to consumer-members.

“It was transformative for the co-op,” Brooks said. “We’ve never really dealt with anything of this scale before.”

To make matters worse, the federal disaster grants that were supposed to help the co-op recover have put Douglas Electric in danger of losing its tax-exempt status.

The co-op has applied for about $7 million in grants from the Federal Emergency Management Agency—aid that, because of a change in the 2017 federal tax law, will put it well over the 15% limit on non-member income to keep its tax-exempt status.

Language in the 2017 law threatens the tax-exempt status of more than 900 co-ops nationwide by inadvertently redefining grants as non-member income. Previously, these grants had been counted as capital.

Brooks and other co-op CEOs are lobbying Congress to pass the RURAL Act, a bipartisan bill that would allow co-ops to accept grants again without risking their status. He and other co-op leaders are telling their stories to lawmakers to urge members of Congress to sign onto the bill, which had more than 200 co-sponsors in the House and nearly 30 in the Senate as of Oct. 1.

What follow are other examples that underscore the negative impact of the tax law:

Broadband in Upstate New York

It isn’t only natural disasters that are triggering the dilemma for co-ops. In upstate New York, Otsego Electric Cooperative finds itself at risk of losing its tax-exempt status because it accepted $14 million in state grants to bring high-speed internet service to its members.

“Unless Congress fixes the problem, we will have to file a for-profit tax return for this year and pay tax of as much as $1 million,” said Tim Johnson, CEO of the small Hartwick-based co-op, which has annual revenues of about $7 million.

The co-op began investing in retail broadband before the tax law change and has continued because it believes the service is essential for its members, many of whom live in high-poverty areas.

“Without broadband, kids were having trouble doing their homework at night,” Johnson said. “Just to be able to communicate and participate in today’s economy, you need high-speed internet. … Everyone has it now except rural people.”

Damaged Transmission Cable in Wisconsin

In June 2018, the 20,000-foot-long underwater cable that brings electricity to members of the Washington Island Electric Cooperative in Wisconsin failed, cutting off power to the island’s residents.

The tiny co-op used diesel generators to restore power to its 860 members within 20 minutes, but the cable—damaged by years of ice chunks pushing against it each spring—needed to be replaced. Repairs to the existing cable and installing a new one cost more than $4 million, said Robert Cornell, the co-op’s general manager.

The co-op was eligible for $600,000 in state disaster aid and the state legislature is budgeting $2 million to help pay for the new cable, he said.

“Based on the way things are now, we absolutely will lose our tax-exempt status,” Cornell said. “We’re going to be paying taxes on the money the state gave us to help us. I’m not an accountant, I’m an engineer. But, to me, that makes no sense.”

Hurricane Recovery in Florida

Hurricane Michael’s devastating 155-mph winds caused $90 million in damage to Gulf Coast Electric Cooperative in Wewahitchka, Florida, last October. That’s more than twice the co-op’s annual revenue.

To help it recover, the co-op accepted $32 million in FEMA grants and now faces the loss of its tax-exempt status, said CEO John Bartley. The co-op has had to institute a storm recovery charge of about $9 a month for its members to help pay for repairs that the FEMA aid doesn’t cover. If Gulf Coast EC has to pay taxes on top of that, co-op members will be hit even harder, Bartley said.

“Our members are still struggling to fix their homes and businesses as it is,” he said. “Asking them to pay millions more in higher rates is just wrong.”

Ice Storm in Minnesota

An ice storm in early April knocked down or damaged almost 1,300 power poles owned by Federated Rural Electric Association in Minnesota, cutting off electricity to about 80% of members. The co-op, with a workforce of 80, spent nearly $900,000 to restore power within about three days. Rebuilding its system after the storm will cost at least $3 million more, said Scott Reimer, general manager of the Jackson-based co-op.

Reimer said FEMA is about to do a final review to determine how much of the damaged system will meet eligibility standards for federal assistance. The co-op will use these funds to help pay for the $4 million in damages, he said. The co-op asked for the FEMA grants because “if we don’t, then this all goes on the back of our membership,” Reimer said.

The co-op should be able to get through the disaster without being forced to lose its tax-exempt status, he said.

“But all it would take is another storm to push us over the limit,” Reimer said. “Once our members of Congress hear about the problem, it’s an easy sell to get them to support the RURAL Act. That’s what grassroots do for you. Once we tell them what’s going on here, it’s easy for them to jump on the bandwagon to fix it.”

Read more coverage of the RURAL Act:

Co-op Voices, Part 2: How Losing Tax-Exempt Status Would Hurt Rural America

RURAL Act: Why Popular, Bipartisan Legislation Can Face Hurdles in Congress

Q&A: Senate’s Lead RURAL Act Sponsors Discuss Their Strategy for Passage

As Majority of House Signs On to RURAL Act, Lead Sponsors Press for Vote

Q&A: RURAL Act’s Lead House Sponsors Say Co-op Voices Are Key to Bill’s Success

Co-op CEO to Congress: Help Expand Rural Broadband by Passing RURAL Act

NRECA CEO Jim Matheson: ‘If We All Stand Up,’ Co-ops Can Save Tax-Exempt Status

Co-op Advocacy Needed to Move Vital Tax Fix in Congress

Bipartisan Bill Would Protect Co-ops From Losing Tax-Exempt Status

Listen to a recent podcast on the RURAL Act:

Two members of Congress from rural states are championing the top legislative priority for electric cooperatives: a bill to ensure that co-ops don’t lose their tax-exempt status if they accept government grants to restore power after natural disasters or provide broadband service to rural communities.

Reps. Terri Sewell, D-Ala., and Adrian Smith, R-Neb., are the lead sponsors of the RURAL Act, which would allow co-ops to once again take grants from local, state and federal governments without risking their tax-exempt status. Co-ops must receive at least 85% of their income from members to retain that status under federal law. However, the Tax Cuts and Jobs Act of 2017 inadvertently made it tougher for co-ops to meet that requirement by counting government grants as non-member income for the first time.

The RURAL Act would fix the problem, and the legislation is steadily gaining co-sponsors. During the last two weeks, 66 members of Congress have signed on to support the House bill, driving the total to 168 as of Sept. 20.

Sewell and Smith—in separate interviews—talked about the importance of the bill to rural communities and discussed their strategy for passing the legislation this year. Here’s what they had to say:

Why is it important to you to lead the effort to pass the RURAL Act in the House?

Sewell: You know, I come from the rural parts of my district, from Alabama’s Black Belt, so I truly believe we need access to important services that are provided by these electric co-ops, including reliable access to broadband and to electrical power after a disaster. This problem was an unintended consequence of the 2017 tax law and it threatens access to FEMA (Federal Emergency Management Agency) relief or government grants on broadband access. I believe that the NRECA co-ops are best situated for providing those kinds of services. That’s why I’m trying to fix that unintended consequence. I’m quite aware that co-ops serve over 42 million members in over 56% of our nation’s landscape, including 88% of our counties. This is really an important service, especially since you serve many poor rural areas.

Smith: My goal since coming to Congress is to address rural America’s challenge and strengthen it for the future. Just as rural power generation and transmission were vital to rural economic growth in the 20th century, access to both power and broadband will drive our rural economies in the 21st.

How would it harm your constituents if electric cooperatives lose their tax-exempt status?

Sewell:  I serve communities across Alabama’s Black Belt that face persistent poverty. They depend on these rural cooperatives for reliable electricity and broadband service, and they are particularly vulnerable to anything that would increase price. These things are basic necessities. The tax-exempt status of the co-ops really ensures that these families get the critical services that they need.

Smith: Nebraska has a long tradition of relying on public and cooperative power generation to affordably meet the needs of families, farmers, ranchers and small businesses. Our goal in 2017 was to ensure as many Americans as possible could benefit from tax reform, and this bill helps ensure more Americans see those benefits.

Your bill is a rare bipartisan tax bill. What has been your most persuasive argument to convince your colleagues to co-sponsor the bill?

Sewell: These issues really aren’t partisan. Access to broadband and the need to rebuild service after a natural disaster—these aren’t Democratic or Republican issues. I’m very proud to co-sponsor this bill with Adrian Smith of Nebraska. While our districts are far apart geographically, they’re very similar in the rural parts. People across the spectrum recognize how important this is, and that it was not the intended effect of the 2017 tax law.

Smith: Access to affordable power is an issue important in every state, county, city and town. While there may not be broad agreement on issues like tax rates, there is strong agreement on the value electric cooperatives provide their members and their place in the tax code.

Are you pushing for a vote in the Ways and Means Committee this year? Or would it be faster to try to attach the legislation to some other must-pass bill? What do you see as the most effective strategy?

Sewell: I think that both Adrian and I are pushing to get a vote in the Ways and Means Committee. We both sit on Ways and Means. We’re looking for any opportunity to push the bill forward. I’ve advocated for consideration of the bill before the committee since I introduced it in April. But we know that the most direct way to get something like this done has been as an inclusion in a must-pass spending bill. I think that the more bipartisan support we continue to get in co-sponsorships, the more this will become a no-brainer and could be put into a package that’s passed later this year.

Smith: This bill should be broadly supported enough to move on its own, but my primary concern is ultimately getting it across the finish line.

How can co-ops and their members best help you pass the bill?

Sewell: I think you’re already doing it! I really want to thank the NRECA co-ops for your active engagement in making sure our members of Congress know about the bill. We’re going to continue to need that strong engagement to get this done. The more that co-ops can share with their members of Congress and their senators, the better. It’s going to take hearing those real-world consequences to convince members of Congress to sign onto the bill. The best people to tell that to them is your co-op members. There are no better voices that could be heard.

Smith: The best way to ensure legislation gets passed, even if it already has broad support, is to keep reminding your representatives and senators of how important it is to you. Keep contacting your federal representatives and, in particular, make clear to them the tangible impact of enacting this bill on your cooperative.

Read more coverage of the RURAL Act:

Q&A: Senate’s Lead RURAL Act Sponsors Discuss Their Strategy for Passage

RURAL Act: Why Popular, Bipartisan Legislation Can Face Hurdles in Congress

As Majority of House Signs On to RURAL Act, Lead Sponsors Press for Vote

Co-op Voices, Part 1: How Losing Tax-Exempt Status Would Hurt Rural Residents

Co-op Voices, Part 2: CEOs Discuss Impacts of Tax Law Glitch for Members

Co-op CEO to Congress: Help Expand Rural Broadband by Passing RURAL Act

NRECA CEO Jim Matheson: ‘If We All Stand Up,’ Co-ops Can Save Tax-Exempt Status

Co-op Advocacy Needed to Move Vital Tax Fix in Congress

Bipartisan Bill Would Protect Co-ops From Losing Tax-Exempt Status

Listen to a recent podcast on the RURAL Act:

Electric cooperatives were built as not-for-profit entities in order to serve their members, and as such, they rely on their tax-exempt status to keep power affordable. But that status has been threatened by an unintended consequence of the 2017 federal tax law.

The new law states that co-ops that accept government grants—to help cover costs such as rebuilding after natural disasters or bringing broadband to rural communities—can lose their tax-exempt status if those grants amount to more than 15% of their overall revenue. NRECA and its member co-ops are mounting a major grassroots campaign to get Congress to pass the RURAL Act, which would address the problem.

In this episode of Along Those Lines, hear from Louis Finkel, NRECA’s senior vice president for  government relations, on why this legislative fix is so vital for co-ops. We’ll also get perspectives from two co-op leaders facing this tax dilemma firsthand: Tim Johnson of Otsego Electric Cooperative in New York and Scott Reimer of Federated Electric Cooperative in Minnesota.

Listen to the episode below:

You can also listen and subscribe to Along Those Lines on your preferred podcast service:
Apple Podcasts | Google Podcasts | Stitcher | Spotify | YouTube

Related Content:

Q&A: Senate’s Lead RURAL Act Sponsors Discuss Their Strategy for Passage
Q&A: RURAL Act’s Lead House Sponsors Say Co-op Voices Are Key to Bill’s Success
RURAL Act: Why Popular, Bipartisan Legislation Can Face Hurdles in Congress
As Majority of House Signs On to RURAL Act, Lead Sponsors Press for Vote
Co-op Voices, Part 1: How Losing Tax-Exempt Status Would Hurt Rural Residents
Co-op Voices, Part 2: CEOs Discuss Impacts of Tax Law Glitch for Members
Co-op CEO to Congress: Help Expand Rural Broadband by Passing RURAL Act
Matheson: ‘If We All Stand Up,’ Co-ops Can Save Tax-Exempt Status
Co-op Advocacy Needed to Move Vital Tax Fix in Congress

Find out more about NRECA’s podcast. Questions or suggestions? Email us at AlongThoseLines@nreca.coop.

The southeast Kansas service area of Heartland REC covers 12 counties stretching over 3,500 square miles. So when line crews make calls, they’re in for a long drive.

To minimize on-site repairs, the poles need to be in good shape “to withstand all that weather we get in southeast Kansas…the blizzards, the winds, the tornadoes,” said Ron Graber, director of member service and communication at the Girard, Kansas, co-op.

Heartland REC has one of 12 projects receiving $181 million in loans from the U.S. Department of Agriculture to improve service to members. The co-op’s $13.6 million loan will help it improve 3,800 miles of line and upgrade its smart metering system for faster outage detection.

Altogether, the USDA investments will benefit 11 co-ops and a solar farm in Wisconsin that serve a total of 214,000 rural residents and businesses in 10 states.

“For more than eight decades, USDA has been a strong partner to rural communities in building and expanding electric infrastructure,” Rural Utilities Service Administrator Chad Rupe said Aug. 9.

USDA will make additional funding announcements in coming weeks. In fiscal year 2019, Congress appropriated $5.5 billion for USDA’s Electric Loan Program administered by RUS.

Victoria A. Rocha is a staff writer at NRECA.

Check out the full list of the latest RUS loan recipients.

When Congress returns next month from its August recess, there are only about 40 legislative days left this year in the House and about 50 in the Senate. That leaves a small window of opportunity for progress on the most pressing issues for electric cooperatives.

John Cassady, NRECA’s vice president of legislative affairs, gives an update on how co-op priorities have fared so far in 2019 and what’s next. The greatest urgency in this session of Congress is to try to push through two key bills: the SECURE Act, which would save co-ops more than $30 million a year in pension insurance premiums paid to the federal government, and the RURAL Act, which would protect co-ops from losing their tax-exempt status if they accept government funds, such as disaster relief or rural broadband grants.

What would you say is the most important progress that NRECA lobbyists have made so far in this session of Congress?

“We’ve made progress on key priorities, including progress on our top two legislative initiatives. The first is ensuring that the Senate follows the work of the House and finishes the job on the SECURE Act, which contains the language that provides relief from the high premiums the Pension Benefit Guaranty Corp. is charging our co-op pension plan. Our premium relief is tied up in a broader retirement package that has been approved by the House on an overwhelmingly bipartisan vote.

“Currently, the larger package is being held up by a few senators, not based on anything related to the substance of the issue that we care about. Nevertheless, it’s slowed the momentum from quick Senate action. Now, there is going to be a process on the Senate floor for the SECURE Act to move forward, and the hope is that the process will eventually lead to the Senate passing the bill and then getting it to the president’s desk this fall.

“There are a lot of trapdoors throughout the process, and that’s why these things never come easy … but this issue has been a long time coming.”

What about the other top legislative priority, the RURAL Act?

“On the issue of the RURAL Act, we’ve made a great deal of progress but are not quite as far along as the SECURE Act. This time last year, we were still doing a lot of the behind-the-scenes work on this issue: explaining to key members of Congress and their staff the impact of the issue, why it needed to be addressed, and lining up champions for our legislation. A lot of the blocking and tackling work had to be done.

“Fast forward to now, where we sit favorably if you look at the fact that the RURAL Act now boasts over 90 bipartisan co-sponsors in the House and 18 bipartisan co-sponsors in the Senate. There’s a high degree of awareness of the issue, and there’s a recognition that our challenge was an unintended consequence of the 2017 tax law. There’s an appetite to get it done.

“But we also face some obstacles. There are still some negative optics among some on the Hill who associate anything tax-related with the Tax Cuts and Jobs Act of 2017, which was handled in a very partisan manner that created a lot of bad partisan feelings. There are still some rough edges out there on Capitol Hill when tax policy is brought up. The challenge we have had, and what we’ve tried to maneuver around, is to avoid having the perception on the Hill that our issue is a purely partisan priority. We want to create a bipartisan recognition that our issue needs to be addressed on behalf of co-ops throughout the country and the rural communities they serve.”

Co-ops are worried about losing their tax-exempt status if they take federal, state or local broadband grants or disaster relief grants from the Federal Emergency Management Agency. Is this one of the issues you hear most about from co-ops?

“Yes, we’re hearing concerns in certain sections of the co-op world. I know Florida co-ops are very engaged from a FEMA standpoint, as an example. Many co-ops are leading with the concern that if their co-ops are hit with a major storm and there’s a presidential disaster declaration and FEMA grants are dispersed, that having those resources that help us restore power would then negatively impact our tax-exempt status and generate a tax liability for our member co-ops. That is an issue that helps put a point on our advocacy.

“The other issue is that some co-ops are working to help bridge the digital divide and leaning on grant dollars to put forward the initial capital investment. For example, there are a number of co-ops in Indiana looking to take advantage of the broadband grant program that the state has instituted. In doing so, they could potentially upset their tax-exempt status, which really runs counter to the goal of bringing broadband to rural areas. It’s a perverse outcome of public policy that our members would be in this position. They’re just trying to do the right thing, to bring solutions to their communities for broadband, and this unintended consequence has real impact on their ability to do so.”

Do you think there will be a big infrastructure bill in this Congress that could include more broadband funds and grid modernization?

“If you were to go through the halls of Congress, every member would say ‘infrastructure is a great idea. Democrats and Republicans should come together on infrastructure.’ But if you don’t have the right environment, it makes it challenging. There’s a high degree of tension between congressional Democrats and the Trump administration … and it doesn’t show any signs of letting up. So that doesn’t create a conducive atmosphere for bipartisan cooperation.

 “If I had to handicap the likelihood of a broad infrastructure package making its way through Congress, I would say it’s a low-probability proposition at this point.”

Have you played more offense or more defense on co-op issues so far with this Congress?

“We’re playing offense on the SECURE Act and the RURAL ACT. We played defense on a number of issues as well. A good example is the administration’s budget proposal to, once again, propose that the transmission assets of the Power Marketing Administrations be privatized. We had to play defense there and engage with policymakers on the Hill to ensure that that idea didn’t gain any footing.”

Erin Kelly is a staff writer at NRECA.

Editor’s note: After the publication of this story, members of the Alaska House of Representatives voted 31-7 on July 29 to approve the state’s capital budget, eliminating the threat of massive budget cuts that included subsidies for rural power, higher education, and dozens of other programs.

Declining oil and gas revenues and a political fight over the size of Alaskans’ annual dividend check could lead to huge increases in utility bills for thousands of the state’s electric co-op members. Co-op-served communities could also be hit with higher costs for electricity used to provide essential services like water treatment and sanitation.

“More than 84,000 Alaskans in 194 communities are facing higher electric bills resulting from the current lack of funding for the Power Cost Equalization program,” said Crystal Enkvist, executive director of the Alaska Power Association. That means consumers could see some of the highest kilowatt-hour costs in the nation beginning in August.

PCE provides economic assistance to some of the more isolated rural communities and residents in Alaska, where the cost of electricity can be three to five times higher than for consumers in more populous areas of the state. APA has made preservation of the program, administered by the Alaska Energy Authority, a perennial priority. 

Under Alaska’s constitution, the PCE endowment and other similar funds are “swept” into the state’s Constitutional Budget Reserve at the end of each fiscal year. Typically, the legislature votes to reverse the sweep and put the money back in the funds on July 1.

This year, because of disagreement over the size of the Permanent Fund Dividend—the share of the state’s oil wealth that is distributed to individual Alaskans each year—15 Republican members of the state House withheld support to reverse the sweeps. This effectively defunded the PCE endowment for the 2020 fiscal year.

“We’ve contacted all 60 legislators, met with the Alaska Energy Authority, launched a media relations effort, and kept our members updated on new developments,” said Enkvist, adding that the statewide association’s 22 co-ops have been emphasizing the devastating impact of the cuts to their members.

“It’s ‘all hands on deck’ to get funding from somewhere— anywhere—by the end of July, because if funding doesn’t materialize, we may have to post PCE at a zero rate,” said Meera Kohler, CEO of Alaska Village Electric Cooperative. The result could mean co-op members would bear the total costs for their electricity service.

Kohler said failure to resolve the funding issue could as much as double AVEC’s residential rates. The Anchorage-based co-op serves 58 communities.

Increases of as much as 200% in municipal public facility costs for street lighting, water and sewer system operations and energy for public buildings are possible, said Kohler. AVEC communities receive $11 million annually from PCE, a 40% share of the total program.

“For Cordova Electric Cooperative, our most likely scenario is a revenue shortfall of $500,000, shared equally across all rate classes,” said Clay Koplin, the co-op’s CEO. He is also the mayor of Cordova, a city of 2,200 on the Prince William Sound.

Like many local officials across the state, Koplin is concerned about depleting savings and investment accounts to cover the city’s lost revenues. Alaska has no sales or income taxes and relies heavily on oil and gas industry revenues to cover most public spending.

Alaska Gov. Michael J. Dunleavy vetoed $444 million in state spending on June 28 and has proposed a series of cost-offset measures, draining dozens of accounts used to subsidize various programs.

“This might be palatable if it were the only option, but using a portion of the Permanent Fund earnings that pay out the personal checks to citizens is being taken off the table,” said Koplin. Dunleavy has withheld consideration of direct payments to Alaskans from funding cuts prompted by the sweeps.

PCE funds have traditionally provided a subsidy offsetting the cost of up to 500 kWh for residential utility customers in rural Alaska, including members of electric cooperatives.

“Without the PCE program, our members could see an increase up to about 39 percent added to their monthly electric bill,” said Martin Shroyer, CEO and general manager of Kotzebue Electric Association. “We have elders and others who are on fixed incomes who already have a tough time paying for electric, water/sewer, garbage pickup and heating fuel,” he said.  “If the PCE program goes away, a lot of families in rural Alaska will be hurt.”

Derrill Holly is a staff writer for NRECA.

The House voted overwhelmingly Wednesday to repeal the “Cadillac tax” on health care benefits that electric cooperatives and other employers provide for their workers.

In a rare bipartisan action, House members voted 419-6 to repeal the excise tax, which was created as part of the 2010 Affordable Care Act, better known as Obamacare. Congress has twice delayed the tax from taking effect, but it is scheduled to begin in 2022 unless lawmakers take further action.

The Senate still must vote, but may not take up the bill immediately, instead waiting for the 2020 election year, said NRECA lobbyist Christopher Stephen. Sen. Martin Heinrich, D-N.M., has introduced a repeal bill in that chamber. It has more than 40 bipartisan co-sponsors.

The tax imposes a 40% surcharge on employer-sponsored health care plans that are considered “high cost,” including those offered by co-ops. It was created to help fund medical coverage for uninsured Americans, and its repeal could cost the federal government nearly $200 billion over the next decade, according to the nonpartisan Congressional Budget Office.

NRECA believes the tax unfairly harms co-op employees in rural areas, where health care costs are higher because of limited access to medical care. Co-ops provide health insurance benefits to more than 100,000 employees, retirees and their families, Stephen said.

The tax has been widely unpopular, drawing opposition from both business groups and labor unions. Supporters of the repeal bill said the tax would hurt middle-class families because employers would likely pass the cost on to workers in the form of higher deductibles and co-pays.

“Taxing any part of co-op employees’ health care benefits will leave electric cooperative families with less comprehensive health coverage, many at higher costs,” Stephen wrote in a fact sheet that NRECA provides to members of Congress.

“No cooperative, whether they get health insurance through NRECA’s benefit plans or from another source, should be penalized for doing the right thing for their employees.”

The bipartisan repeal bill was sponsored by Reps. Joe Courtney, D-Conn., and Mike Kelly, R-Pa.

“Today, you are going to see Republicans and Democrats come together to do the right thing for the right reasons,” Kelly said Wednesday on the House floor. “And good things are going to come of that.”

Magnolia Electric Power’s growth has remained slow and steady at about 2% each year, but that doesn’t mean the southwest Mississippi co-op treats line upkeep and improvements lightly.

The U.S. Department of Agriculture recently approved a $40 million loan to help the co-op make line improvements in its six-county service area. The co-op plans to use the funds to replace aging copper wire with aluminum, upgrade a substation to buttress performance of existing transformers and build a new substation. The loan includes $4 million for smart grid technologies.

“We already have a very reliable system now, so this just helps us to keep that going,” said Darrell Smith, general manager and CEO of the Summit, Mississippi, co-op.

Magnolia Electric Power is one of 17 co-ops receiving a portion of USDA’s $858 million in federal loans to improve rural electric infrastructure—a total that includes $64 million for smart grid technologies. Altogether, the loans will help co-ops build and improve 3,741 miles of power lines to meet current and future needs of rural residents and businesses in 17 states.

The loan guarantees from the USDA’s Electric Loan Program will benefit about 450,000 residents and businesses.

“Investing in our nation’s electric infrastructure powers our economy, creates jobs and helps deliver services such as education, training and health care to build stronger rural communities,” said USDA’s Joel Baxley, acting assistant to the secretary for rural development, in announcing the loans May 30. “These loans will help rural electric cooperatives generate and distribute power to keep systems reliable and affordable for those who live and work in rural areas.”

In McKee, Kentucky, most of the $36 million loan to Jackson Energy Cooperative will extend 159 miles of line and add related facilities for new service requests. The remainder of the funds will replace aging copper conductor across the co-op’s service area.

“As we replace the copper with aluminum, our system reliability will continue to show improvements within our area of service,” said Carol Wright, the co-op’s president and CEO.

ARLINGTON, Va. – The National Rural Electric Cooperative Association (NRECA) today applauded House passage of H.R. 1994, the SECURE Act. The bill will lower the premiums that electric co-ops pay to the Pension Benefit Guaranty Corporation (PBGC) for their defined benefit pension plan.

“Electric co-op pension plans pose nominal risk of default, yet co-ops continue to pay PBGC premiums as if they were Fortune 500 companies with higher risk profiles,” NRECA CEO Jim Matheson said. “I applaud the House for recognizing these important differences and passing this bill to save electric co-ops more than $30 million annually. Our pension plan helps co-ops attract and retain qualified employees for the future, while promoting economic security for retirees. We are grateful to Reps. Ron Kind (D-Wis.) and Mike Kelly (R-Penn.) for championing these provisions in the House.”

NRECA offers retirement and health insurance benefits to co-op employees, including a defined benefit pension plan. More than 880 electric co-ops participate in the plan, which covers more than 56,000 employees in 47 states.

The PBGC is a government agency that protects pension benefits in private-sector defined benefit plans. In April, more than 2,000 electric co-op advocates raised the PBGC premium issue with their members of Congress during NRECA’s legislative conference.

The National Rural Electric Cooperative Association is the national trade association representing more than 900 local electric cooperatives. From growing suburbs to remote farming communities, electric co-ops serve as engines of economic development for 42 million Americans across 56 percent of the nation’s landscape. As local businesses built by the consumers they serve, electric cooperatives have meaningful ties to rural America and invest $12 billion annually in their communities.

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Sen. Johnny Isakson, R-Ga., received the NRECA Distinguished Service Award for leading congressional efforts to pass legislation to benefit electric cooperatives, including a bill that saved co-op pension plans hundreds of millions of dollars. 

Georgia’s electric co-op leaders who were attending the 2019 Legislative Conference in Washington, D.C., recognized the senator at his office on Capitol Hill.

Dennis Chastain, president and CEO at Georgia Electric Membership Corp., lauded Isakson as a “tireless advocate for electric cooperatives throughout his time in public service,” which began in the state legislature decades ago.

The senator “has played a key role on many of the issues affecting electric cooperatives that those of us in this room advocate on during these conferences,” Chastain said.

Isakson, who chairs the Senate Committee on Veterans’ Affairs, is a longtime member of Cobb EMC in Marietta.

“In my state, our electric membership cooperatives serve 4.4 million Georgians and employ nearly 6,000 workers,” Isakson said. “It’s my honor to fight for the customers and employees in Georgia and across the United States who benefit from not only stable sources of power but also the numerous community services, training programs and other initiatives led by our EMCs.” 

Isakson helped secure a provision in the 2015 “Medicare Doc Fix” bill that exempted co-ops in the NRECA Retirement Security (RS) Plan from a $300 million deficit reduction contribution. 

He was also a co-sponsor of the “Cooperative and Small Employer Charity Pension Flexibility Act,” which permanently excluded the RS Plan from the volatile and costly provisions of the Pension Protection Act of 2006. It was signed into law in 2014.

Isakson recently led the effort for a tax credit for advanced nuclear power facilities. Georgia’s generation co-op, Oglethorpe Power in Tucker, and its distribution co-ops are co-owners in Plant Vogtle, where units 3 and 4 are under construction, and expected to go online in 2021 and 2022, respectively.

“By working across the aisle, Senator Isakson was ultimately successful in getting this measure in the Bipartisan Budget Act of 2018,” said Chastain. “If not for Senator Isakson’s efforts, the modification to the Nuclear Production Tax Credit would not have been realized.”

Electric cooperatives will get $485 million in the latest round of loans from the U.S. Department of Agriculture to enhance systems that will benefit thousands of members.

The loans, announced in early April, will allow co-ops in 12 states to upgrade and build more than 2,600 miles of power lines. USDA is providing the financing through the Rural Utilities Service Electric Loan Program.

“These loans will enhance rural economic development and help improve the quality of life for people who live and work in rural America,” said Joel Baxley, USDA’s acting assistant to the secretary for rural development.

The funding includes nearly $7.1 million to help co-ops incorporate smart grid technologies such as computer applications, two-way communications, geospatial information systems and other tools to increase the reliability and efficiency of electric power systems.

In Jefferson City, Missouri, Central Electric Power Cooperative will use part of its $72 million loan to build a backup control center to ensure continuity of operations in the event of a natural or manmade catastrophe, including building structure fires or cyberattacks.

“Cyber hacks that would shut down the primary center but have the backup center operational are a qualifying event,” said Christopher Turner, CEO and general manager of the G&T.

The loan will also help the G&T rebuild its transmission system, about 70 percent of which was built in the 1950s and 1960s. “The newly rebuilt lines will have increased capacity to supply higher peak loads and taller and more resilient structures for improved reliability and safety,” said Turner.

The loans will go to co-ops serving 12 states: Georgia, Illinois, Michigan, Minnesota, Mississippi, Missouri, New Mexico, North Carolina, North Dakota, South Dakota, Texas and Wisconsin.

Victoria A. Rocha is a staff writer at NRECA.

Story Updated: April 16, 2019

Congress has taken the first step to protect electric cooperatives from losing their tax-exempt status when they receive government grants to help restore power after a storm or bring broadband service to rural communities.

Reps. Terri Sewell, D-Ala., and Adrian Smith, R-Neb., introduced legislation April 16 to correct an unintended consequence of the sweeping Tax Cuts and Jobs Act that Congress passed in 2017. It’s a companion bill to the one introduced in the Senate on April 4 by Sens. Rob Portman, R-Ohio, and Tina Smith, D-Minn.

The 2017 tax law inadvertently put nonprofit co-ops in the position of having to decide whether to risk their tax-exempt status to accept grants, including those from the Federal Emergency Management Agency to restore power after storms, floods, fires, earthquakes or other disasters, said Paul Gutierrez, an NRECA lobbyist who has been working with lawmakers to fix the problem.

Co-ops also would have to think twice before taking grants that help provide broadband service or fund economic development, energy efficiency and renewable energy programs.

“Our rural communities depend on reliable infrastructure, access to broadband and secure energy sources for their local economies to thrive,” Sewell said. “We must do more to provide high-speed internet—and the opportunities and resources that it brings—to the 22.4 million Americans living in rural parts of our country without quality internet access.”

The 2017 law contains a provision that counts federal, state and local grants to co-ops as non-member income rather than capital, which is how grants had previously been defined, Gutierrez said.

The statute threatens the nonprofit business model of co-ops, which must receive at least 85 percent of all income from consumer-members to keep their tax-exempt status under federal law. Defining grants as non-member income makes it more difficult for co-ops to meet that requirement.

Tim Johnson, CEO of Otsego Electric Cooperative, said the Hartwick, New York, co-op is choosing to use state broadband grants but is risking its tax-exempt status in the process. The co-op is applying for grant reimbursements from the state that will put Otsego well over the 15 percent limit for non-member income in 2019. It will lose its tax-exempt status if the tax bill fix is not passed by the end of this year, Johnson said. What’s more, 21 percent of the grant money will have to be used to pay taxes on the grants, he said.

“The combined penalties of paying income tax on grant funds and the loss of tax-exempt status will significantly reduce our ability to build as many locations as we originally projected, depriving many households of the intended and direct benefits of public grant funding for the broadband project,” he said. “This is clearly not good public policy and the inadvertent mistake that has caused this situation must be fixed.”

The new bipartisan legislation—the Revitalizing Underdeveloped Rural Areas and Lands (RURAL) Act—would solve the problem by changing the tax code to exempt federal, state and local grants from being defined as income for electric co-ops.

“While continuing to ensure rural electric co-ops are largely funded by their membership as a condition of their tax-exempt status, we should also ensure funds received from grants or for pole usage do not affect their tax status,” Adrian Smith said.

Without the legislation, Portman said, “many co-ops may miss out on grant income or disaster assistance, hurting our efforts to promote economic development and job creation in these rural areas.”

Tina Smith said Congress “should take any action we can to help us get more Minnesotans and Americans in rural areas connected.”

“So when I heard from several Minnesota cooperatives at risk of losing their tax-exempt status, I wanted to reverse that,” she said.

NRECA hopes that Congress will act on the legislation “in the very near future,” Gutierrez said.

“This is an urgent issue for a number of members that will lose their tax-exempt status this year if Congress doesn’t act on this unintended consequence,” he said.

Erin Kelly is a staff writer at NRECA.

Electric cooperatives will be building and upgrading hundreds of miles of power lines to serve thousands of members in Arkansas, Florida, Indiana, Oklahoma and South Dakota thanks to $122 million in new loans from the U.S. Department of Agriculture.

“Modern and reliable electric infrastructure is foundational to building prosperity in rural America,” said Joel Baxley, USDA’s acting assistant to the secretary for rural development, in announcing the loans.

The money, approved Feb. 28 through USDA’s Rural Utilities Service Electric Loan Program, will go to seven co-ops and will help build or improve 964 miles of power lines and benefit more than 6,200 business and residential members.

West River Electric Association in Wall, South Dakota, was awarded the largest loan—$30 million—and will apply the majority of it toward construction of 14 miles of 69-kv transmission line to provide a tie to an existing substation.

The project will deliver power to a planned new substation that will accommodate commercial growth in and around Rapid City and Box Elder, South Dakota, said Dick Johnson, CEO and general manager of the co-op, which celebrates its 80th anniversary this year.

The loan will also help pay for upgrades at West River Electric’s substation in Wall. One third of the money will cover “day-to-day items that incur with new services, service upgrades, meters, transformers, and equipment replacements,” said Johnson.

“I am thankful we have low-cost RUS funding available to continue to provide low-cost power for our member-owners at the end of the line, just like we have over the last 80 years,” he added.

Steven Seibert, president and CEO of Southern Indiana Power Cooperative, said such RUS loans are a critical means for maintaining systems and providing reliable electricity. The co-op in Tell City, Indiana, will use a $10.5 million loan to build and improve transmission infrastructure that serves 600 rural members and install second-generation advanced metering infrastructure.

“Southern Indiana Power values our relationship with USDA and RUS as they assist our cooperative in providing safe, reliable and affordable energy while improving the lives of our members,” said Seibert.

Also receiving loans were Rich Mountain Electric Cooperative in Mena Arkansas, $20 million; Central Florida Electric Cooperative in Chiefland, Florida, $17 million; Verdigris Valley Electric Cooperative in Collinsville, Oklahoma, $20.1 million; Black Hills Electric Cooperative in Custer, South Dakota, $14.8 million; and Bon Homme Yankton Electric Association in Tabor, South Dakota, $9 million.

Cathy Cash is a staff writer at NRECA.

NRECA advocates on many public policy issues on behalf of electric cooperatives. As the new Congress kicks off, here’s a look at several electric co-op policy priorities for 2019.

Energy Policy/Infrastructure

The potential for energy and infrastructure legislation presents a significant opportunity as electric cooperatives work to meet the growing needs of their communities. NRECA will work to ensure that any infrastructure package focuses on more than roads and bridges, including opportunities to modernize the electric grid and expand rural broadband access.

Environment

NRECA will promote and encourage bipartisan support for energy research and development programs—including on renewables and programs that focus on finding a viable use for carbon capture, utilization and storage.

Broadband

Expanded rural broadband access remains a priority for NRECA. As electric co-ops engage the new Congress, we will work to ensure that all rural broadband discussions include the electric co-op perspective.

Employee Benefits

NRECA provides benefits to 56,000 electric cooperative employees nationwide. We will continue working to protect electric cooperative employee retirement benefits by supporting legislation to substantially reduce the insurance premiums that co-ops pay to the Pension Benefit Guaranty Corporation.

Tax Policy

The 2017 tax reform law included a provision that treated federal grants as income, threatening the tax-exempt status of some electric cooperatives. NRECA will seek to fix this unintended consequence of the tax law.

Grid Resilience

Protecting our nation’s vast power grid is a national priority and focus for electric cooperatives. Ensuring appropriate information sharing and preserving existing partnerships and structures are essential to these efforts.  We will advocate for resources and technologies that meet the unique cybersecurity and recovery needs of small and medium-sized utilities to help protect our systems.

Listen to our podcast episode on how NRECA works with Congress to advocate for co-op priorities: 

From community development to broadband and renewable energy, electric cooperatives stand to benefit from the Farm Bill overwhelmingly passed by Congress this week and now headed to President Trump, who’s expected to sign it.

The House voted 369-47 in favor of the bill on Wednesday, a day after the Senate approved it, 87-13.

“The bill advances the interests of rural America,” said NRECA CEO Jim Matheson. “Its strong rural development provisions will enable co-ops to invest in modernizing the electric grid and continue key economic development activities in the communities they serve.”

Lawmakers agreed to keep or expand several programs important to electric co-ops.

The bill preserves the Rural Economic Development Loan and Grant Program beyond 2021, when funding was scheduled to expire. Electric co-ops use this program to finance economic development projects in their communities.

Funding also is maintained for the Rural Energy for America Program, which offers loans and grants for renewable energy initiatives.

The bill also extends the Rural Energy Savings Program to provide loans for home energy retrofits. Electric co-ops created the program as part of the 2014 Farm Bill. The new language increases the allowance for administrative expenses from 3 percent to 5 percent of the loan.

Big Win for Rural Broadband

Several provisions in the bill will help electric co-ops bridge the digital divide:

• Authorization for $350 million a year in grants and loans for deploying rural broadband. (Funding for this new program is in addition to the Department of Agriculture’s $600 million broadband loan/grant pilot program included in the budget passed by Congress in March.)
• Areas with low population density will be eligible for the highest proportion of federal grants. Broadband projects in areas with fewer than seven people per square mile may be eligible for grants covering up to 75 percent of the total project.
• Grants will be available for areas where 90 percent of the homes lack internet service at the minimum level of 25 megabits per second to download data and 3 Mbps to upload. In areas where half the homes are without 25/3 Mbps service, applicants will be eligible for loans.
• Loan or grant applicants must now commit to build broadband service at speeds that will meet the areas’ future needs.
• The bill does not prevent the use of Rural Utilities Service funding for broadband projects in areas that have received Federal Communications Commission funding.

Mixed Results on ‘Cushion of Credit’ Program

The RUS cushion of credit program has provided escrow-like accounts for borrowers to deposit excess money and earn a steady return. The Farm Bill modifies the program to allow for withdrawals from the cushion of credit account for purposes of paying down RUS debt without penalty. The bill will eventually lower the interest rate paid on cushion of credit balances.

The bill includes these changes to the cushion of credit program:

• No new cushion of credit deposits will be allowed after the bill is enacted.
• Co-ops in the program may transfer their cushion of credit money to prepay RUS loans without penalty through Sept. 30, 2020.
• Remaining cushion of credit funds after 30, 2020, may be applied only to regular RUS debt service payments.
• Existing cushion of credit balances will earn 5 percent interest until Oct. 1, 2020, when that rate will drop to 4 percent. Beginning Oct. 1, 2021, interest on remaining balances will be paid at a floating 1-year Treasury rate.

Cathy Cash is a staff writer at NRECA.

As CEO of Otsego Electric Cooperative, one of Tim Johnson’s goals is to make broadband internet service, with all its economic benefits, available to each of his cooperative’s 4,800 accounts. To do so, the co-op took a common path: finding government grants to help offset costs.

Now, because of provisions lurking in the 2017 federal tax reform law, the co-op’s tax-exempt status could be on the line.

“We will probably be forced to make a decision in early 2019 on whether or not to seek full reimbursement” from the state under grants it received for the broadband project, Johnson said.

NRECA’s government relations team, which is working on a legislative remedy, said Otsego’s sudden turmoil is an unintended consequence of language in the new tax law regarding how government grants impact a tax-exempt entity.

To be considered tax exempt, electric co-ops are limited to a 15 percent threshold of non-member income. As written, the 2017 tax law counts money received from any government grant—federal, state or local—as non-member income, where previously, most such grants were considered contributions to capital and not “income.”

Though the IRS has not indicated how or even whether it would enforce this language, it effectively means electric co-ops, particularly small ones, may be vulnerable when it comes to accepting aid long considered vital for operations and community development initiatives. This includes grants from the USDA’s Rural Utilities Service, the Rural Economic Development Loan and Grant (REDLG) program and the Federal Emergency Management Agency for recovery from hurricanes, floods or other disasters.

NRECA is working with Congress, the Internal Revenue Service and the Treasury Department to resolve the issue soon. Lawmakers leading the effort include Sens. Tina Smith, D-Minn., and Rob Portman, R-Ohio, and Rep. Adrian Smith, R-Neb.

“We are working on a legislative fix to be included in an end-of-year tax or funding bill,” said Paul Gutierrez, a senior principal in NRECA’s government relations group.

“We are also requesting the IRS and the Treasury Department to provide guidance so that the new section of the tax law does not have unintended consequences for tax-exempt electric co-ops. Otherwise, the implications are that electric co-ops may not be able to take advantage of the $600 million Congress approved this year for rural broadband through the Rural Utilities Service.”

The New York Broadband Program awarded Hartwick, New York-based Otsego Electric $10 million between 2017 and 2018 to build an 860-mile fiber-optic network. This includes 100 miles of line outside the co-op’s membership territory as a requirement for the grants.

The co-op also won $4 million from the Federal Communications Commission’s Connect America Fund II auction. That money will be awarded over 10 years.

The entire project is forecast to cost about $18 million if it is completed in 2019. Otsego Electric has been reimbursed only $710,000 of the state grant funds and borrowed money to finance the rest of the costs of construction for the first 250 miles of fiber.

The co-op is pondering whether to apply for the balance of the state grant to complete its build at the risk of losing its tax exemption.

“We are hoping changes will be made to the tax code by Congress or in the interpretation of the code by the IRS soon to help us out of this jam,” said Johnson.

Cathy Cash is a staff writer for NRECA.

No one likes overpaying, and electric cooperatives are no exception. Yet co-ops are spending much more than they should when it comes to insurance premiums for retirement pension plans.

“Because of the strength of our network, electric co-op retirement plans pose little risk of default. Yet we are required to pay insurance premiums as if we are a high-risk venture,” said NRECA CEO Jim Matheson. “When we overpay these premium costs, we take money away from our core mission as co-ops—member benefits and services.”

NRECA is pushing hard in the remaining weeks of Congress this year to bring down pension insurance costs. It joins more than two dozen other national organizations in urging Congress to pass the Retirement Enhancement and Savings Act (H.R. 5282 and S. 2526).

The legislation would reduce premiums paid by NRECA to the Pension Benefit Guaranty Corp. (PBGC) for the Retirement Security Plan by more than 80 percent. Senate Finance Committee Chairman Orrin Hatch, R-Utah, and ranking Democrat Ron Wyden of Oregon are among those who support the legislation.

How Congress Could Reduce Co-op Pension Plans

The Retirement Enhancement and Savings Act would cut by 80 percent PBGC premiums for electric co-ops’ pension plans. (Source: Joint Committee on Taxation)

“There are heavy-hitters in our corner looking for a path forward,” said Christopher Stephen, NRECA senior legislative affairs director.

NRECA has been seeking to reduce these costs since 2006, when Congress changed the rules for all pension plans. Lawmakers in 2014 recognized that the retirement plans of NRECA and other rural co-ops and charity groups have significantly lower risk profiles than those of Fortune 500 companies and excluded them from volatile increases in required plan funding. But the formula determining PBGC insurance costs remained the same.

“Current PBGC rules are designed for large for-profit companies, not small, not-for-profit co-ops and charities. The legislation will address this inequity,” said Stephen.

The bill also addresses compliance issues for co-ops in the Retirement Security Plan or in their own plans that are closed to new employees while continuing benefits for current employees.

During the post-election lame duck session of Congress, NRECA is also urging lawmakers to resolve other issues important to co-ops. They include amending Section 118 of the 2017 tax law, which threatens co-ops’ tax-exempt status by counting government grants for rural development, broadband or storm recovery toward the non-member income limit of 15 percent.

NRECA also is advocating for strong rural development and broadband programs in a final compromise on a Farm Bill, before Congress adjourns for the year.

Cathy Cash is a staff writer for NRECA.

Energy efficiency improvements can pay for themselves in savings, and when they’re fully financed with loans that can be repaid on monthly power bills, consumers have an added incentive to make cost-saving upgrades.

“Electric cooperatives can make the loans available to their members at 3 percent interest under the USDA’s Rural Utilities Service Rural Energy Savings Program (RESP),” said Lindsey Smith of KW Savings Co. The not-for-profit enterprise administers “Help My House” initiatives for participating electric co-ops in South Carolina.

RUS has made up to $100 million available for RESP loans during the 2019 fiscal year, which began Oct. 1. Participating co-ops can obtain funds from the pool at zero percent interest and use them to help consumer-members make long-awaited efficiency improvements without having to make down payments.

“RESP gives us the opportunity to make more of the energy upgrades consumers need, like high-efficiency heat pumps, attic insulation, caulking, weatherstripping and other improvements that can help make their homes more comfortable year-round,” said Smith.

Those improvements not only help co-op members control their electricity costs, but the savings are designed to be “bill neutral.” That means the monthly savings achieved through the efficiency upgrades offset the monthly loan payments.

“The energy savings for the consumer typically are more than enough to cover the finance costs,” said Smith. “And because the loans are bound to the home’s meter, and not to the homeowner, traditional credit checks are not needed.”

Contractor Bubba Toole builds a new return vent inside Janet Murphy’s home as part of a number of upgrades financed with an energy efficiency loan administered by Aiken Electric Cooperative. (Photo By: Muriel Gouffray/Aiken EC)

The availability of the new RESP funding from RUS is timely because co-ops typically start hearing from members concerned about high bills as heating season gets under way.

In some cases, the program is being used to give members who get energy audits options for financing energy-saving improvements and upgrades. That’s particularly attractive for higher-cost improvements they otherwise might delay or avoid because of upfront costs.

“For members who can’t afford to make the improvements co-ops typically recommend during audits, this program is a great option,” said Smith. “CEOs from our participating co-ops love how well it works for their members.”

About 24 percent of South Carolina co-op members live in manufactured housing, and as those units age, they can be particularly prone to air leaks.  That can dramatically increase utility bills while homes can be uncomfortable during cold snaps and oppressive summer heatwaves.

“When you can’t pay your power bill with one whole paycheck, you have a problem,” said Diane Taylor of Monetta, South Carolina, recalling an electricity bill that topped $700 for one month of service. “I didn’t want to get the power bill out of the mailbox.”

Taylor is a member of South Carolina’s Aiken Electric Cooperative. The co-op enrolled her in its Help My House program, and contractors made improvements that included insulation, caulking and weatherstripping, a new energy-efficient heat pump with a thermostat, and sealed duct work.

“I’ve had power bills as low as $190,” said Taylor. “That includes the $100 we pay monthly for the loan.”

Taylor estimates her family is saving about $250 a month, compared to bills before the upgrades. Other members who’ve participated in the RESP loan program since Aiken EC first offered it have also reported savings outstripping the combined costs of the loan payments and their monthly energy bills.

“The Help My House program makes the members’ home more comfortable, saves them money and they are appreciative,” said Gary Stooksbury, CEO of Aiken Electric Cooperative.  “If we are truly about the member, we should help them lower their energy costs.”

One of seven S.C. co-ops awarded the first RESP loan from RUS, Aiken Electric will lend another $5 million to members through its Help My House Program beginning in 2019.

“Our participating CEOs tell us that the minimal energy sales they lose by offering ‘Help My House’ are more than offset by increased member satisfaction,” said Smith. “Like Diane Taylor at Aiken Electric, their members become disciples for the co-op. They have more money for food, medicine and other basic needs.  That helps the community and it’s good for the co-ops.”

Derrill Holly is a staff writer at NRECA.

When it comes to rural high-speed internet, federal funding should not impose restrictions on where broadband can be built nor limit who can provide that service.

That’s the message NRECA CEO Jim Matheson delivered to the Senate Agriculture Committee that is drafting the 2018 Farm Bill.

“Expanding access to high-speed internet service should be one of the most important elements of the Senate Farm Bill,” Matheson said in a letter to Sen. Pat Roberts, R-Kan., and Sen. Debbie Stabenow, D-Mich., the committee chairman and ranking member, respectfully.

Matheson voiced strong opposition to adding provisions that would prevent the use of Rural Utilities Service funds to deploy broadband in areas that have received support from the Federal Communications Commission’s Universal Service Fund, even in areas where systems deliver substandard internet service.

“Unfortunately, there are policy proposals being disseminated that are designed to simply protect the status quo and will leave parts of rural America with second-class broadband service for decades to come,” he told the senators.

NRECA is urging the bill drafters instead to create a grant-loan combination program at the U.S. Department of Agriculture that is technology-neutral to help build broadband networks in remote parts of the country.

“A new approach to broadband deployment is needed to ensure that rural America does not continue to be relegated to ‘good enough for rural’ service standards,” Matheson said, noting that some systems only provide download/upload speeds of 10/1 or 4/1 megabits per second. The Federal Communications Commission benchmarks fixed broadband at 25 Mbps/3Mbps.

“The people we serve in rural America recognize that without access to modern, high-speed broadband on par with their urban counterparts, rural competitiveness, productivity and quality of life will suffer.”

The fate of multiyear legislation to address agriculture is uncertain this year as Congress nears its August recess. The Senate committee is expected to finish writing a farm bill in June. The U.S. House of Representatives failed to pass its own version of the bill May 18.

Cathy Cash is a staff writer at NRECA.

ARLINGTON, Va. – National Rural Electric Cooperative Association (NRECA) CEO Jim Matheson today applauded the inclusion of electric co-op priorities in the House Farm Bill:

“The Farm Bill is an essential tool to strengthen rural America and drive our nation’s economy,” Matheson said. “Provisions in the House Farm Bill will enable electric cooperatives to continue improving the quality of life in America’s communities. We strongly support efforts to expand rural broadband access and fortify rural development programs, both of which are essential for rural America to fully participate in the 21^st century economy. We encourage Congress to continue working to reauthorize the Farm Bill before it expires this year.”

The House legislation would create a broadband grant program at USDA to better target rural areas that need it most and create workable solutions to bridge the digital divide. The proposal also provides support for other rural development programs that help electric co-ops modernize the electric grid while undertaking innovative, cost-effective energy projects.

Matheson recently called for the Farm Bill to invest in rural America by including:

• Additional funding for rural broadband grants and loans.
• Support for proven rural economic development programs.
• Accelerating energy innovation in the development of renewable energy resources and electric grid modernization.
• Funding for rural electrification programs.

The National Rural Electric Cooperative Association is the national trade association representing more than 900 local electric cooperatives. From growing suburbs to remote farming communities, electric co-ops serve as engines of economic development for 42 million Americans across 56 percent of the nation’s landscape. As local businesses built by the consumers they serve, electric cooperatives have meaningful ties to rural America and invest $12 billion annually in their communities.

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A $1.3 trillion spending bill that includes a number of electric cooperative priorities passed Congress and was signed into law by President Trump on March 23.

“This bill strengthens programs that are essential to the economic health of rural America while also emphasizing the need to continue pursuing innovative solutions to future energy and economic needs,” NRECA CEO Jim Matheson said of the measure, which keeps the federal government running through Sept. 30, the end of fiscal 2018.

One key provision provides a boost to electric co-ops that want to bring broadband to their members. The bill authorizes $600 million for the Agriculture Department to make loans and grants for rural broadband, which Matheson called “a positive step towards connecting the rural economy and closing the digital divide.”

“High costs and low population density remain the biggest obstacles to expanding rural broadband access,” said Matheson.

Other provisions benefiting electric co-op operations include $5.5 billion for the Agriculture Department’s electric loan program. Co-ops that borrow to make infrastructure improvements repay the government with interest.

The bill will streamline government red tape that impedes the ability of electric co-ops to manage vegetation near utility rights of way on public lands. Better land management access will allow co-ops to bolster system reliability.

There’s also funding for cybersecurity research and development—a key ingredient as co-ops work to stay ahead of evolving cyber threats. The Cybersecurity for Energy Delivery Systems (CEDS), from which NRECA currently receives funding for the Rural Cooperative Cybersecurity Capabilities Program (RC3), went from $62 million to $75 million.

LIHEAP, the Low Income Home Energy Assistance Program, will receive $3.64 billion, up from the current $3.39 billion. The increase follows the annual LIHEAP Action Day on March 13, which NRECA supported, and the March 16 release of a bipartisan letter, signed by 171 House members, urging “no less than $4.7 billion” in LIHEAP funding for fiscal 2019.

The spending bill is also notable for what’s not included. Congress opposed a Trump administration proposal to sell off the transmission assets of three federal Power Marketing Administrations. The bill also avoids drastic cuts to the Rural Economic Development Loan & Grant Program (REDLG).

Michael W. Kahn is a staff writer at NRECA.

Co-Mo Electric Cooperative CEO Ken Johnson is taking the helm of the USDA’s Rural Utilities Service with a proven record in electric co-op leadership when it comes to efficiency, infrastructure and broadband.

“The ongoing collaboration between RUS and electric co-ops remains essential to the success of rural communities across the nation as co-ops invest in infrastructure upgrades to modernize the grid and meet consumer expectations. Ken is exceptionally qualified to serve in this role, and we look forward to working with him in his new capacity,” said NRECA CEO Jim Matheson.

Johnson has served as general manager/CEO of Co-Mo Electric in Tipton, Missouri, since 2005. As RUS administrator, he will draw upon that co-op experience to benefit all rural Americans.

“I am honored and deeply humbled to have been selected for this opportunity to serve,” said Johnson. “I’m looking forward to working with the administration on infrastructure, primarily helping to close the digital divide between urban and rural America. Rural Americans need high-speed broadband. It’s a necessity in order to live a quality of life that all Americans deserve.”

In 2011, Johnson pioneered a path to bring the fastest broadband internet access to all his co-op members who were unserved or underserved and falling behind their urban peers in jobs, education and medical services. Electric co-ops seeking to build internet access for their members across the country still look to the “Co-Mo Model.”

Agriculture Secretary Sonny Perdue lauded Johnson’s appointment and what it means for the rural agriculture economy. RUS provides loans and grants to support critical infrastructure in rural communities, including electricity, water, telecommunications and wastewater systems.

“As President Trump pursues his comprehensive agenda of infrastructure improvements like increased broadband access for rural communities, adding Ken Johnson to the USDA team is exciting,” said Perdue. “Ken’s experience with rural utilities, including real success in expanding access to high-speed internet, will serve us well as we strive to increase prosperity across rural America.”

Perdue’s Agriculture and Rural Prosperity Taskforce report concluded internet access is essential for the economies of small communities dotting the country.

Johnson, who grew up on a farm near Edgar, Nebraska, is a director and past president for Central Electric Power Cooperative in Jefferson City and a director for the Association of Missouri Electric Cooperatives. He began his career with the Nebraska Public Power District.

Barry Hart, executive vice president and CEO of the Missouri statewide, said that Johnson’s leadership, ingenuity and deep appreciation of electric co-ops portends great things to come.

“Ken Johnson is one of the top co-op managers I have ever worked with in my 40-year career. He has never forgotten that he works for the co-op members at the end of the line,” said Hart.

Cathy Cash is a staff writer at NRECA.

Support for the Rural Utilities Service program that electric cooperatives use to deliver reliable power to their members would remain steady at $5.5 billion under bills passed by congressional appropriations committees.

The Senate Appropriations Committee approved a broad agriculture spending bill for fiscal 2018 that includes money for the RUS Electric Loan program and other co-op priorities.

Earlier in July, the House Appropriations Committee also set a $5.5 billion spending level for the loan program as part of its agriculture appropriations bill.

The $5.5 billion funding level matches President Trump’s budget proposal and is the amount sought by electric cooperatives. It’s the same total as in fiscal 2016 and 2017.

Unlike past agriculture appropriations measures, the fiscal 2018 bills are not accompanied by language that restricts the use of RUS loans to certain types of projects.

Kirk Johnson, NRECA senior vice president, government relations, said co-op leaders did an excellent job of securing commitments for the RUS program from their elected officials at the recent Legislative Conference.

Support letters for the RUS program that circulated on Capitol Hill drew a record number of signatures from members of Congress, he said.

“We’re pleased that many of these two committees’ actions reflect that understanding and we’ll continue make the case as the appropriations process moves on,” he said.

The appropriations bills also each include $750 million for the Guaranteed Underwriter program, which allows qualified private lenders to provide guaranteed financing to electric cooperatives. The administration’s budget proposal did not include funding for the program.

The Trump budget proposed scrapping support for the Rural Economic Development Loan and Grant program (REDLG), which enables co-ops to invest in their communities and create jobs. However, the Senate bill set aside $42 million for REDLG, about $9 million more than the House bill.

No timetable has been established for floor action on the bills in either chamber.

Steven Johnson is a staff writer at NRECA.

Co-ops Urge Full “Cadillac Tax” Repeal in Final Conference Agreement

Issue. NRECA has worked to ensure that all member cooperatives have access to comprehensive, flexible and affordable health insurance programs for employees and their dependents. Electric cooperatives provide health insurance benefits to over 100,000 employees, retirees and their families. Under the federal Employee Retirement Income Security Act (ERISA), the NRECA Medical Plan is a national plan that allows each member co-op to design a health benefit package tailored to its employees and retirees. Whether an electric co-op provides health insurance through NRECA or from another source, ever-rising health care costs threaten our ability to provide health insurance. We support all efforts to make health care more affordable, so that all electric co-ops can maintain these critical benefits. Reforms must also preserve each electric co-op’s ability to tailor its health benefits package as currently allowed under ERISA, and should not be taxed in order to fund other government spending.

Status. NRECA has been a leader for years in supporting full repeal of the Affordable Care Act (Obamacare) “Cadillac Tax” for all electric co-ops. Originally effective in 2013, it was postponed by Congress to 2018, and now 2020. The “American Health Care Act” passed the House 217-213 on May 4, and would delay this tax further until 2025. Bipartisan, bicameral legislation (S. 58 and H.R. 173) introduced in January 2017 by Sens. Dean Heller (R-NV) and Martin Heinrich (D-NM), and Reps. Mike Kelly (R-PA) and Joe Courtney (D-CT) repeals this unfair tax in full.

NRECA Position. We applaud the “American Health Care Act” for not including any new, direct taxes on workers’ employer-provided health benefit, and for delaying the “Cadillac Tax” until 2025. However, we will work with lawmakers to fully repeal this unfair tax in any final Conference Agreement.

No co-op, whether they get health insurance through NRECA’s Medical Plan or from another source, should be penalized for “doing the right thing” for their employees; and our employees should not be penalized for where they work, or where they live. We don’t have “Gold-Plated Cadillac Plans” – our employees live in rural communities where limited access makes the cost of that health care disproportionately higher than in urban areas.

NRECA’s Medical Plan is a not-for-profit, self-insured/self-administered trust fund that operates “at cost” like our members It utilizes group purchasing to lower drug costs and PPO provider discounts. Collaboration with our provider networks ensures that our employees can access health care where they live. All assets are used only for member employee benefits, and premiums are priced to meet expenses.

In short, taxing any part of any co-op employee’s health care benefits will leave all electric cooperative families with less comprehensive health coverage and/or higher costs. Congress should focus on strengthening the employment-based system that currently covers over 100,000 electric cooperative employees, retirees and their families; not taxing them to pay for others. Congress and the Administration should fully repeal this unfair “Cadillac Tax” in any final Conference Agreement.

Chris Stephen, NRECA / 703-907-6026 / chris.stephen@nreca.coop

(ARLINGTON, Va.) – For the 10th consecutive year, the National Rural Electric Cooperative Association (NRECA) has received the Companies As Responsive Employers (CARE) Award by Northern Virginia Family Service (NVFS).

Developed by NVFS and area business leaders in 1993, the CARE Award recognizes companies in Northern Virginia that excel in providing innovative, supportive and family-friendly policies, programs and services.

“We’re extremely proud to receive our 10th consecutive CARE award, because we place great value on creating a workplace that fully supports our employees and their families,” said NRECA CEO Jim Matheson. “NRECA strives to help employees find a healthy work-life balance and encourages them to explore opportunities to volunteer in their communities. Commitment to community is part of who we are as a cooperative, and it’s a value reflected in our employees and our more than 900 not-for-profit co-op members.”

Matheson will give the keynote address at a Nov. 18 NVFS ceremony, during which NRECA and 15 other local companies will receive the award.

CARE Award recipients are selected based on their performance in the categories of flexible work arrangements, dependent care, work-family stress management, and benefits and community involvement.

NRECA, which administers the health plans for many of its rural electric cooperative members, is fully committed to employee health and wellness. NRECA offers robust benefits including a free, onsite fitness center, free yoga and employer contribution match to employee Dependent Care and Medical FSA accounts. Additionally, NRECA offers educational assistance, commuter assistance, telework and compressed work schedules. Employees also can receive eight hours of paid leave for every 24 hours of volunteer work at approved organizations.

The National Rural Electric Cooperative Association is the national service organization that represents the nation’s more than 900 private, not-for-profit, consumer-owned electric cooperatives, which provide service to 42 million people in 47 states.

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Brandon McBride has been administrator of the Rural Utilities Service since 2015. McBride was a senior professional staffer in Congress on rural issues before President Obama appointed him to head RUS. In this Q&A, he answers questions about the role that RUS and rural electric cooperatives can play in meeting the needs of rural America.

Q. What is the biggest challenge you have faced since becoming administrator of RUS?

A. One of the biggest challenges is to keep reminding the public, policy makers and even rural electric cooperatives what a big job they have and how hard it is to serve rural, remote and sparsely populated areas. The success of our program and its partnership with rural electric cooperatives has made too easy to underestimate both the difficulty and importance of providing affordable power to the 80 percent of America’s geography that is rural.

Q. What do you see as the major recent accomplishments of RUS in connection with electric co-ops?

A. I am very proud that RUS continues to be a reliable, affordable and flexible source of capital for rural electric infrastructure investment. We succeeded in implementing the new Rural Energy Savings Plan, which will make $52 million in zero-interest loans available to energy providers to help rural families and small businesses reduce energy use. This new program, called RESP, is already oversubscribed. RESP builds on our work to increase funding for energy efficiency under the Energy Efficiency and Conservation Loan Program.

I am also very pleased that Rural Development published an environmental regulation which considered and carefully balanced the comments of hundreds of Americans concerned with both a cleaner, greener future and affordable power for rural America. The reviews have been good and I believe we got the balance right, thanks to input from NRECA, rural electric cooperatives and commenters on all sides of this issue. Publishing a final rule in this area removed uncertainty and opens the door to investments for the future.

It’s also very exciting to see the rural electric cooperative movement continue to grow and provide 21st century leadership for affordable power. For example, I am pleased that RUS helped electric distribution cooperatives serving southern Minnesota acquire a portion of an investor-owned utility’s territory and assets which will improve service, efficiency and reliability for customers and improve the economics of the service territory. The July 2015 acquisition was a win/win for everyone.

Q. What do you say to critics who argue RUS has accomplished its mission of electrifying rural America and is no longer needed?

A. Distance and density remain the largest barriers to modern utility service for rural Americans. Affordable power, as well as affordable telecommunications, water and sewer services are all critical to the rural quality of life and rural economic development. As long as rural communities need to improve and upgrade electric systems, gain access to affordable, robust broadband service, and invest in clean, safe water, RUS programs will continue to be relevant.

Networks need continuous care, modernization and maintenance to survive and thrive. We are also seeing dramatic technology, market and regulatory changes affect the entire electric market. RUS financing is critical for rural utilities to manage their costs in a changing environment. In capital intensive industries, like electric service, low cost capital translates into lower power rates for residential and business consumers.

As long as the cooperative business model continues to succeed at providing affordable, reliable electric power to rural communities, RUS and its sister Rural Development programs can help with funding for a variety of community facilities, housing and business needs.

Q. What are the strengths of RUS as a financing source versus private lenders and how do you ensure co-ops have flexibility to meet their local needs?

A. One of the greatest strengths of the RUS program is that it facilitates the participation of private lenders. I believe that the rural electric system is well served by a diversified portfolio of borrowing. The power of the RUS/REA system is that it is based on years of practical utilities experience and builds borrower equity and creditworthiness as borrowers finance and build their electric systems. As the electric industry evolves with new technologies and renewable energy, investment will be critical not just for rural economies, but nationwide. There is an advantage in portfolio diversity, with a mix of private funds and RUS’ extremely low interest rates.

Working with borrowers, co-lenders and applicants, RUS is dedicated to finding financing solutions for rural electric cooperatives which meet the modern needs of rural America.

Q. Co-ops and RUS have key partnerships on programs like REDLG and the Rural Energy Savings program. Where do you see these programs going?

A. Across America, rural electric cooperatives are leading rural economic development; improving the quality of life and investing in the future. The REDLG program, where co-ops borrow funds to relend for rural economic development, and the Rural Energy Savings Program and the Energy Efficiency Conservation Loan Program where co-ops borrow funds for energy efficiency, help rural electric co-ops meet the needs of their communities. For example, Quinter, Kansas with a population of 1,000, was able to build a new fire station to better meet the needs of the 400-square mile service area, with funding from a REDLG loan from Midwest Energy.

These programs can help rural electric cooperatives better meet the needs of their customers and their communities. Whether a co-op wants to help customers reduce power use and costs, or improve access to health care by funding a medical clinic, REDLG and RESP offer solutions that can improve the quality of life in rural communities. These are just two examples of our partnership that works in so many ways to make rural America the great place that it is.

Q. How can RUS and co-ops work together to expand access to high-speed Internet in unserved rural areas?

Brandon McBride speaks about broadband service at a session in South Carolina. (Photo By: USDA Rural Development)

A. Today, 40 percent of those who live and work in rural areas lack the same access to affordable high-speed internet service common in non-rural areas. The Obama Administration is very much focused on ways to improve access to broadband service.

RUS and the Commerce Department’s National Telecommunications Information Administration are leaders in the Broadband Opportunity Council’s effort to expand broadband access. We clearly need more partnerships in rural areas to leverage all available resources to support broadband deployment. Rural electric cooperatives are in a unique position to help achieve that goal. With changes in the electric utility industry and in rural America, broadband is a critical element in the ability of rural electric cooperatives to respond to new customer needs. And RUS, with experience in both electric and telecommunications systems, is ready to assist them by offering low cost financing to deploy infrastructure for high-speed internet access, including smart grid technologies, through our telecommunications, broadband and electric programs.

I also want to recognize Jo Ann Emerson for bringing her passion for rural broadband to NRECA. That is a lasting legacy. As a result of her work, rural electric and telecomm providers have launched a productive dialogue on ways to connect rural America to the world of high speed internet access. This is critical to rural America’s efforts to reach its full potential.