A new analysis finds that electric cooperatives have a wide-ranging economic impact in the United States, supporting nearly 623,000 jobs with $51 billion in pay and benefits each year while contributing hundreds of billions of dollars to the economy over a five-year period.

According to this analysis, co-ops’ activity contributed $554 billion to U.S. gross domestic product between 2018 and 2022 for an average of $111 billion per year. Co-ops also generated $135 billion in federal, state and local tax revenue over this period.

The report, “Economic Powerhouses: The Economic Impacts of America’s Electric Cooperatives,” was commissioned by NRECA and the National Rural Utilities Cooperative Finance Corp. (CFC) and conducted by Strategen Consulting, an energy strategy consulting firm and NRECA associate member. It details the economic impacts of distribution and generation and transmission cooperatives’ annual capital, operations and maintenance expenditures as they engage in the distribution, transmission and generation of electricity, as well as the disbursement of excess operating revenue returned to consumer-members as capital credits.

While co-ops had a major impact nationwide, the report also found that much of this activity happens locally. Within the counties they serve, co-ops supported jobs for nearly 424,000 people earning $33 billion in pay and benefits annually and contributing $374 billion toward gross regional product across the five-year period for an average of $75 billion per year.

“This report quantifies what many American families and businesses know well—electric cooperatives are powerful engines of economic development in their local communities,” NRECA CEO Jim Matheson said.

“Affordable and reliable electricity is a key ingredient for a successful economy. Electric co-ops are focused on the long-term success of local communities as they keep the lights on and power economic growth.”

CFC CEO Andrew Don added that electric cooperatives “expand their community investments and foster opportunities beyond traditional poles and wires—from creating business incubators to building broadband networks and attracting new employers.”

“These endeavors are further advancing the billion-dollar economic impact of electric cooperatives locally and nationally,” Don said.

Between 2018 and 2022, co-ops invested nearly $409 billion across the U.S. This figure includes $75 billion on capital expenses and infrastructure, $304 billion in operational costs and $24 billion toward maintenance activities. Another $7 billion was disbursed to members in the form of retired capital credits.

In a recent Q&A, NRECA Systems Optimization Director Michael Leitman went into more detail on the study’s findings and methodology:

What’s the big takeaway from this report about co-ops’ economic impact?

Leitman: Electric co-ops create jobs, invest in their communities and jumpstart the economy. They are important drivers of their local economies and have a major impact nationwide. And they’re also focused on the long-term success of their communities by helping bring high-speed internet service and working to access federal infrastructure funds for things like electric vehicle charging stations and microgrid development that will result in additional economic activity in their surrounding areas.

Why do co-ops have such a big financial impact in their communities?

Leitman: Everything co-ops do as companies ripples through the rest of the economy. They’re adding to their electric systems through capital expenditures, and then operating and maintaining those systems. They’re also paying their employees and contractors and supporting the local tax base.

Let’s say a co-op directly spends money on a new substation, a capital expenditure. The indirect impact results from the money that goes to the manufacturers of the equipment that goes into that substation—transformers, power lines, control systems—and on along their supply chains—steelmakers, copper producers and hardware and software developers. The induced impact comes from the pay and benefits going to the co-op employees, contractors and all the suppliers, which are then spent in the broader economy.

Did the addition of new technologies (renewables, EVs, etc.) affect the results?

Leitman: Yes. Co-ops are making significant investments in the grid, and there’s new generation coming online. In fact, compared to the last study period, co-op capital investments were 20% higher and operations expenditures were 10% higher. Some of that is inflation, but co-ops have also been ramping up spending in infrastructure investments in recent years. I do think those new technologies are part of the reason that you saw this increase in capital spending because they are making a lot of these investments.

For this study, and the previous one for the 2013-2017 time period, researchers (in this case, Strategen) used a model called IMPLAN. What is that and what did researchers do differently this time around?

Leitman: IMPLAN is an economic input-output model that’s widely used by a lot of different kinds of industries, researchers, and government. Data on business expenditures provided by CFC goes into the model, which uses regional data and multipliers to calculate the “direct” impact of these expenditures within the assigned industry (in this case the electric industry), the additional “indirect” impacts to other related industries through the supply chain, as well as the “induced” impacts through personal spending in unrelated sectors of the broader economy.

NRECA provided Strategen with a list of counties served by co-ops and rural public power members in each state. This allowed them to take advantage of county-level multipliers in the IMPLAN model to target expenditures to the specific co-op footprint in each state, improving the accuracy of the analysis and allowing these areas to be broken out to show how much co-ops’ national economic impact is centered in their local communities.

Victoria A. Rocha is a staff writer for NRECA.

More than $430 million in rural infrastructure awards recently announced by the U.S. Department of Agriculture will help electric cooperatives strengthen their systems and increase grid reliability and security.

The latest round of funding from USDA’s Electric Loan Program, announced Aug. 28, will go to 19 co-ops in 10 states and will also help fund smart-grid technologies.

The largest single loan will go to Lake Country Power in Cohasset, Minnesota. The co-op will use the $82 million loan to build and improve more than 400 miles of line in eight counties and improve four substations and support all distribution-related construction for the next four years across the co-op’s entire service territory—the largest in the state.

“We rely on the financing and support of the USDA to meet our goals and objectives as the largest geographical electric cooperative in the state of Minnesota,” said Greg Schulzetenberg, manager of community relations and marketing. “We cover many miles of rugged ground in the state and our costs are substantial.”

In addition, the agency’s Rural Economic Development Loan and Grant Program awarded two “pass-through” loans and one grant, $3.9 million in total, to two co-ops in Iowa and Mississippi. The awards will enable local businesses—a metal wholesaler, a hospital and a shortline railroad—to expand their operations.

Southern Iowa Electric Cooperative received nearly $2 million in REDLG funding during this cycle that will help create and maintain about 300 jobs in the co-op’s Bloomfield-based service area. The funding includes a $1.6 million pass-through loan to help Metal Wholesale LLC buy equipment to expand existing product lines and boost production and a $300,000 grant to partially fund the expansion and renovation of Van Buren County Hospital in Keosauqua.

“It’s a big deal,” said Greg Proctor, the co-op’s general manager, of the zero-interest federal loans. “We take a regional approach to economic development and take pride in our relationships with the community as well as that our board is so supportive of these projects.”

Singing River Electric Power Association in Mississippi received a $2 million REDLG loan that will allow the Mississippi Export Railroad, a shortline railroad that operates in the Lucedale-co-op’s service area, to build a new rail shop in Moss Point.

The co-op awards were part of a larger package of USDA investments targeting several areas, including lead pipe remediation, clean drinking water and sanitary wastewater systems. The funding will benefit nearly 480,000 people in 36 states and two U.S. territories.

“USDA invests in rural America because we know strong communities are rooted in their people,” Agriculture Secretary Tom Vilsack said in a statement. “Powering people with modern infrastructure creates good-paying jobs and supports opportunities for people to build brighter futures.”

Victoria A. Rocha is a staff writer for NRECA.

Last year, electric cooperatives saw a major legislative victory with the inclusion of a provision for direct-pay incentives in the Inflation Reduction Act. The new law gives co-ops and other tax-exempt entities the ability to receive reimbursements from the government for deploying certain new energy technologies, putting them on a playing field with for-profit providers.

How did co-ops secure this groundbreaking change in the tax code, and how does it change the game for them going forward? Hear from Paul Gutierrez, NRECA legislative affairs director, Mac McLennan, CEO of Minnkota Power Cooperative in North Dakota, and Eric Jung, CEO of Northeastern REMC in Indiana.

Listen to the episode below:

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

The U.S. Department of Agriculture recently announced $2.7 billion in loans for rural electric cooperatives and utilities to expand and modernize their electric infrastructure and increase grid security.

The latest round of Electric Loan Program funds will go toward 64 projects benefiting nearly 2 million people in 26 states.

“This funding will help rural cooperatives and utilities invest in changes that make our energy more efficient, more reliable and more affordable,” said Agriculture Secretary Tom Vilsack. “Investing in infrastructure—roads, bridges, broadband and energy—supports good-paying jobs and keeps the United States poised to lead the global economy.”

The loans include $613 million for installing and updating smart grid technologies, and nearly half of the awards will help finance improvements in underserved communities.

One of the largest awards will go to Withlacoochee River Electric Cooperative, which serves a high-poverty but fast-growing five-county area near Tampa, Florida. The Dade City-based co-op will use its $212 million loan to build and improve 580 miles of transmission line.

About $32 million will be used for substation and transmission projects, and another $17 million will strengthen smart grid technologies, the co-op said. The largest portion, $58 million, will go toward new underground electric infrastructure to serve new residential subdivisions.

Last year, the co-op added 9,000 new accounts, and it expects to exceed that this year, said David Lambert, WREC’s manager of member relations.

“We’re growing substantially,” he said. “These new loan funds will be used for system expansions in those areas.”

Other sizable co-op loans include:

• Clark Energy Co-op, Winchester, Kentucky: $26 million to build and improve more than 250 miles of power line in 12 central Kentucky counties. The loan also includes about $500,000 for smart grid technologies.
• Marshall County REMC, Plymouth, Indiana: $10 million to build and improve 75 miles of line in six counties in northern Indiana and nearly $1 million for smart grid technologies.
• Rusk County Electric Cooperative, Henderson, Texas: $24.6 million to connect an estimated 2,000 new members and build and improve 91 miles of line in five counties spanning 4,000 square miles. Projects include voltage conversion upgrades, a new transmission feed and substation construction. The loan also includes about $1.4 million for smart grid technologies.

View the full list of recipients and projects.

Victoria A. Rocha is a staff writer for NRECA.

A resilient, reliable electric grid that provides affordable power is crucial for rural communities as America transitions to cleaner energy, the CEO of an Illinois electric cooperative told a Senate committee Tuesday.

“Diversity of electric generation is essential to our commitment to a lower carbon future,” Mike Casper, president and CEO of Jo-Carroll Energy, told the Senate Agriculture Committee at a hearing on the 2023 Farm Bill.

“As cooperatives look to the future, we are exploring all options, technologies and ideas to work to meet the evolving energy needs of the local communities we serve.”

Casper testified that electric co-ops are facing three key challenges:

• Responding to consumer-members’ desire for a diverse energy mix.
• Maintaining reliable baseload power as part of a lower-carbon future.
• Providing services beyond electrification, including rural broadband.

“Unlike the rest of the electric sector, electric co-ops sell the majority of their power to households rather than businesses,” Casper said. “Keeping rates down for rural families at the end of the line is especially important for JCE.”

The Elizabeth, Illinois-based co-op serves about 26,500 electric and natural gas accounts in four counties and provides high-speed internet service to more than 3,000 subscribers through its broadband division, Casper said.

The distribution co-op gets its power from two generation and transmission co-ops, Dairyland Power Cooperative and Prairie Power Inc., both of which have made substantial investments in renewable energy.

“Dairyland recently completed a large wind power purchase agreement to power 16,000 homes in addition to their current renewable portfolio that makes up over 20% of their generation mix,” Casper said. “Prairie Power is similarly investing in renewable energy through solar farm ownership and power purchase agreements for solar and wind energy.”

Jo-Carroll Energy is supplementing that power by developing three community solar arrays, which resulted from feedback the co-op received from member surveys, Casper said. The U.S. Department of Agriculture’s Rural Energy for America Program provided more than $89,000 in grants to help create one of those solar farms.

A new $9.7 billion USDA program created by Congress this year as part of the Inflation Reduction Act will also help interested co-ops build new clean energy systems by providing grants and loans for projects that include renewable energy, energy storage, carbon capture, nuclear power, and generation and transmission efficiency, Casper said.

“These programs will help co-ops meet the future energy needs of the communities they serve while providing important flexibilities to maintain reliable, affordable power in rural America,” he said.

Electric co-ops rely on funding from USDA’s Rural Utilities Service Electric Program to help pay for essential electrical infrastructure projects, Casper said. But too often, he said, RUS loan approvals are “needlessly lengthened by environmental reviews and decision delays.”

“To meet our nation’s growing electricity needs,” Casper said, “electric cooperatives would benefit greatly from reforms to the federal permitting process that maintain robust environmental protections while ensuring determinations are made in a timely manner.”

Co-ops want to continue to collaborate with Congress to help develop the next Farm Bill, Casper said.

“JCE and the rest of our nation’s electric cooperatives look forward to working together in our shared goal of powering and improving the lives of rural Americans,” he said.

Erin Kelly is a staff writer for NRECA.

Updated: Aug. 16

The House passed a budget bill Friday that includes direct-pay tax credits for electric cooperatives to deploy new energy technologies.

House approval came just five days after the broad legislative package, dubbed the Inflation Reduction Act, was passed by the Senate. President Joe Biden signed the bill into law on Tuesday.

Providing direct-pay incentives to co-ops has been one of NRECA’s top legislative goals. The bill passed by Congress will provide direct federal payments to co-ops when they deploy new energy technologies, including carbon capture, nuclear, energy storage, renewables and more.

“Electric cooperatives are leading the charge to reliably meet America’s future energy needs amid an energy transition that increasingly depends on electricity to power the U.S. economy,” said NRECA CEO Jim Matheson.

“As co-ops continue to innovate, access to tax incentives and funding for investments in new energy technologies are crucial new tools that will help reduce costs and keep electricity affordable for consumers.”

Direct-pay incentives will have a major impact on Northeastern REMC’s plans to develop utility-scale solar in Indiana, said Eric Jung, president and CEO of the Columbia City-based distribution co-op.

“It’s going to be absolutely huge in helping us own these assets,” Jung said.

Without direct federal payments, co-ops have had to partner with for-profit businesses that are eligible for tax credits.

“We could sit down at the table to negotiate a deal, but it’s difficult to get a good deal when the other side knows that only they can take advantage of the tax incentives,” Jung said. “Now, we can negotiate on equal footing.”

With passage of the legislation, co-ops have parity with for-profit utilities, which have long enjoyed tax credits to develop wind, solar and other renewable energy projects. Historically, not-for-profit co-ops have not had access to those credits because most of them do not pay federal income taxes.

Jung said Northeastern REMC may decide to develop utility-scale solar on its own since it will be able to receive the direct-pay tax credits. He estimates that the incentives will pay for 22% to 28% of the capital expenditure. That’s a big help to a co-op that has already invested more than $30 million in five battery storage projects.

“This will allow us to do more faster as we continue to deploy renewables and invest in our rural communities,” Jung said. “It’s enormously good news.”

Mac McLennan, president and CEO of Minnkota Power Cooperative in Grand Forks, North Dakota, said direct-pay incentives could help the generation and transmission co-op develop groundbreaking carbon-capture technologies.

The co-op is evaluating Project Tundra, an effort to build the world’s largest carbon-capture facility at its coal-fired Milton R. Young Station power plant near Bismarck.  The $1 billion project is designed to capture 90% of carbon dioxide emissions from flue gas—equal to removing 800,000 gasoline-fueled cars from the road. The CO2 would be stored more than a mile underground near the plant site.

“Passage of this legislation is certainly a positive and will be beneficial to us as we continue to look at Project Tundra,” McLennan said. “It greatly improves the prospect of seeing projects like Tundra move forward.”

McLennan has been working for 20 years to achieve parity for co-ops on tax incentives, and he is gratified to see Congress finally act on the issue.

“This is a very good day not just for Tundra but for all co-ops,” he said.

The legislation also creates a voluntary $9.7 billion grant and loan program designed specifically for electric co-ops that buy or build new clean energy systems. It will be administered by the U.S. Department of Agriculture.

The program will provide funding for a wide range of projects, including renewable energy, carbon capture, battery storage, nuclear power and improvements to generation and transmission efficiency. Interested co-ops will be eligible to receive an award for up to 25% of their project costs, with a maximum of $970 million going to any one co-op.

Erin Kelly is a staff writer for NRECA.

The Senate passed a budget bill Sunday that includes direct-pay tax credits for electric cooperatives to deploy new energy technologies.

The provision was included in a broad legislative package dubbed the Inflation Reduction Act. Debate now moves to the House, which is scheduled to return from recess Friday for consideration of the bill. Though the outcome in the House is uncertain, current indications are that it will likely pass.  

In addition to direct-pay incentives, the legislation would create a voluntary $9.7 billion grant and loan program designed specifically for electric co-ops that buy or build new clean energy systems. 

“Electric cooperatives are leading the charge to reliably meet tomorrow’s energy needs at a cost consumers can afford,” said NRECA CEO Jim Matheson.

“Several provisions in this bill provide electric co-ops with crucial new tools as they navigate the ongoing energy transition and prepare for a future that depends on more electricity to power the American economy.”

Providing direct-pay incentives to co-ops is one of NRECA’s top legislative goals. The Senate-passed bill would provide direct federal payments to co-ops when they deploy new energy technologies, including carbon capture, nuclear, energy storage, renewables and more.

The legislation would give co-ops parity with for-profit utilities, which have long enjoyed tax credits to develop wind, solar and other renewable energy projects. Historically, not-for-profit co-ops have not had access to those credits because most of them do not pay federal income taxes.

The separate $9.7 billion grant and loan program for clean energy systems would provide funding for a wide range of projects, including renewable energy, carbon capture, battery storage, nuclear power and improvements to generation and transmission efficiency. Interested co-ops would be eligible to receive an award for up to 25% of their project costs, with a maximum of $970 million going to any one co-op.

Erin Kelly is a staff writer for NRECA.

A new Senate budget bill includes direct federal payments to electric cooperatives as incentives for developing renewable energy, carbon capture technology, battery storage, nuclear power and other energy innovations.

Senate Majority Leader Chuck Schumer, D-N.Y., and Sen. Joe Manchin, D-W.Va., announced on July 27 that they had reached agreement on an energy, climate, tax and health care package.

The proposed legislation, known as a budget reconciliation bill, must be reviewed by the Senate parliamentarian to ensure all provisions comply with Senate rules. If the review is completed quickly, the Senate could vote on the legislation as early as the week of Aug. 1. If senators approve the bill, it still must be passed by the House, where it is likely to face opposition from Republicans and some progressive Democrats.

“As electric co-ops continue to innovate and lead, direct access to energy innovation tax incentives is absolutely critical,” NRECA CEO Jim Matheson said in a news release. “This bill creates direct incentives for co-ops to bolster investments in carbon capture, grid modernization, renewables, battery storage and other energy technologies.”

“I thank Senator Manchin for his strong leadership on this issue and his commitment to securing a brighter future for rural America,” Matheson said.

Matheson lauded the fact that “the Senate agreement reflects strong recognition” of the direct-pay provision that NRECA and its member co-ops have emphasized in their advocacy efforts on Capitol Hill.

Co-ops are excluded from the tax incentives that for-profit utilities receive for energy innovation because co-ops are not-for-profit and do not pay federal income taxes. If the legislation is enacted, direct payments would be available for existing technologies already eligible for clean energy tax credits. The bill would also create direct payments for a new slate of technologies.

The Senate legislation also includes a $9.7 billion grant and loan program to help electric co-ops buy or build new clean energy systems.

Similar to a program proposed last year by President Joe Biden, co-ops would be able to receive a grant for as much as 25% of their project cost, with a maximum award of $970 million for any single co-op.

The proposed bill would not mandate reductions in carbon dioxide emissions or require closures of existing power plants.

Erin Kelly is a staff writer for NRECA.

Congress must heed recent warnings about grid reliability to ensure that electric cooperatives can continue to provide rural Americans with reliable, affordable power, an Arkansas co-op leader told a Senate panel Friday.

“Electric cooperatives are committed to keeping the lights on across rural America at a cost that families can afford,” said Buddy Hasten, president and CEO of the Arkansas Electric Cooperative Corp., in testimony before the Senate Agriculture, Nutrition and Forestry Committee at a field hearing at Arkansas State University.

“As we look to the future, we worry that federal and state policies, as well as market changes, are causing an imbalance of electric supply and demand that jeopardizes our ability to fulfill this commitment.”

He noted that the North American Electric Reliability Corp. warned in its 2022 Summer Reliability Assessment that parts of the Midwest could face outages during periods of peak demand.

“Put simply, this is because generation capacity has been reduced while peak demand is projected to increase—decreasing supply while increasing demand,” he said. “A concerning pattern is forming in which baseload generation such as natural gas, coal and nuclear energy is prematurely retired and then replaced primarily by intermittent generation like wind and solar.”

It will take a diverse energy mix to provide the power that Americans depend upon, Hasten said.

“To be clear, this is not about prioritizing one energy source over another,” he said. “Our focus is whether we will have the diverse tools needed to keep the lights on for American families and businesses.”

When the electric grid fails, “it almost always results in financial catastrophe and loss of human life,” Hasten said. “It’s important for lawmakers to understand the pivotal role they play in this conversation.”

Hasten also urged Congress to streamline the U.S. Department of Agriculture’s ReConnect Loan and Grant Program, which provides funding for electric co-ops and others to bring high-speed internet to rural communities with little or no broadband service. The Senate agriculture committee is looking to reauthorize the program in the 2023 Farm Bill.

In Arkansas, 14 of the 17 electric co-ops provide broadband service to their members and greatly appreciate the funding provided by ReConnect, Hasten said. However, he said the program is unwieldly and is designed for a traditional telecommunications company, failing to take into account the co-op business structure that has been used successfully for more than 80 years. He said the ReConnect requirements can be especially difficult for small co-ops to navigate since they don’t have large staffs to administer the program.

“As Congress begins to think about the next Farm Bill, ensuring that these programs are flexible and streamlined will allow electric cooperatives to deploy fiber resources as quickly and efficiently as possible,” Hasten testified.

Congress could also help electric co-ops reduce costs for rural Americans by passing key legislation to refinance federal loans and provide direct payments for energy innovation, Hasten told the senators.

In Arkansas, almost every co-op borrows from USDA’s Rural Utilities Service to build and maintain their infrastructure, he said.

“Unlike a private business loan or typical home mortgage, these RUS loans are unable to be refinanced to current market rates without facing a significant prepayment penalty,” he told the senators.

Without relief, co-ops will have to pass expensive debt costs along to their members, Hasten said. He urged senators to support the Flexible Financing for Rural America Act, which would allow co-ops a one-time rate adjustment to current market rates without penalties.

“For electric cooperatives in Arkansas, this would yield over $100 million in future savings for our member-owners,” he said.

Hasten also asked senators to support direct federal payments to not-for-profit co-ops as incentives to help pay for developing new energy resources and technologies, including renewable energy, battery storage projects, nuclear energy facilities and carbon capture and storage.

“Many newer, cleaner technologies are attractive to rural utilities,” he said. “We serve the areas where you are most likely to see expansive solar farms or clusters of wind turbines; however, we are handcuffed by the tax code and the significant capital expenses required to deploy innovative technologies.”

Erin Kelly is a staff writer for NRECA.

Updated: May 2

WASHINGTON, D.C.–Hundreds of electric cooperative leaders converged on Capitol Hill for NRECA’s Legislative Conference this week to urge Congress to help co-ops take advantage of energy incentives, reduce their federal debt and access billions of infrastructure dollars.

“We have a 100% consumer focus on everything we do, particularly in the context of a discussion about policy priorities,” NRECA CEO Jim Matheson said at an April 27 news conference previewing the conference, which began Sunday and continues through Thursday.

NRECA has identified more than two dozen different components in the $1.2 trillion bipartisan infrastructure bill passed by Congress last year that may be of interest to electric co-ops, Matheson said.

NRECA is helping co-ops band together in consortiums to seek funding for projects in five categories: electric vehicles, microgrids, cybersecurity, natural hazards, and smart grids and data. The association is also working to help its member co-ops get broadband funding that will be distributed by state governments.

NRECA has been meeting with federal agency officials as they make decisions about how to distribute funding from the bill, Matheson said.

“We continue to be actively engaged to look for the best ways for our not-for-profit, community-owned organizations to participate in this process,” he said.

Co-op leaders are also asking members of Congress to help pass two additional bills this year, Matheson said.

The first would provide direct federal payments for electric co-ops to develop new energy resources and technologies, including renewable energy, battery storage projects, nuclear energy facilities and carbon capture and storage.

A direct-pay incentive would put co-ops on a level playing field with investor-owned utilities, which already receive federal tax breaks for providing power from solar, wind and other renewable energy sources and for investing in carbon capture.

“Over the last several years, you had billions of dollars of tax credits go toward renewable energy, for example,” Matheson said. “We’re on the outside looking in.”

NRECA is pushing lawmakers to include a direct-pay incentive for co-ops in any tax bill that Congress takes up this year.

“We’re going to be really aggressive in advocating for direct pay to be part of any tax legislation that moves because we think this is a really important step for our members,” he said.

The other major priority is passage of the Flexible Financing for Rural America Act, which would allow co-ops to refinance their loans from the Rural Utilities Service at lower interest rates without prepayment penalties.

The bill was originally estimated to cost the U.S. Treasury about $4 billion over a 10-year period, according to the Congressional Budget Office, but the cost is likely to go down now that interest rates have gone up, Matheson said.

“I know interest rates are on an upward trajectory right now,” he said. “The value of this to our members may not be what it was when we were talking about this a year ago. But, in the long run, this is the right policy for our members.”

Erin Kelly is a staff writer for NRECA.

Electric cooperatives throughout the nation are poised to reap the benefits in 2022 of legislation passed by Congress last year that includes co-op priorities pushed by NRECA and its members.

The biggest success was passage of the $1.2 trillion bipartisan Infrastructure and Jobs Act, which will give a major boost to co-ops by providing billions for broadband deployment, electric vehicle charging networks, electric transmission, energy storage, carbon capture and other clean energy technologies.

In 2022, NRECA will continue to advocate for direct federal incentives for co-ops to develop new energy resources and technologies, including renewable energy, battery storage projects, nuclear energy facilities and carbon capture, said Hill Thomas, vice president of legislative affairs.

NRECA will also push for passage of the Flexible Financing for Rural America Act. The bill could save co-ops more than $10 billion in interest payments by allowing them to reprice loans from the U.S. Department of Agriculture’s Rural Utilities Service at lower interest rates.

Here is Thomas’s perspective on this year’s legislative session:

What do you consider NRECA’s major legislative successes for 2021?

Thomas: We did a good job in a Congress that was stalled by COVID-19 in a world where most offices are still virtual and lawmakers are still singularly focused on just one or two items. I think we adapted well to that environment. Looking back, our biggest successes would be carving out what could be once-in-a-generation opportunities for co-ops in the infrastructure bill and, even though it’s not done, positioning ourselves well to defend against bad outcomes in the budget reconciliation bill while creating some new opportunities for financing for clean energy technologies.

What impact will the American Rescue Plan Act, which Congress passed last March to provide COVID-19 relief, have this year on co-ops?

Thomas: One of the most important policy lessons learned during the pandemic was the lack of broadband access in rural America. The American Rescue Plan sent a lot of money to states that can be used for broadband deployment in rural areas. One of the lasting policy opportunities to come from that bill is that many co-ops will be able to use the money to bring broadband to rural communities.

There seems to be enormous interest among co-ops in applying for funds created by the infrastructure bill for broadband deployment, electric vehicle infrastructure, clean energy technologies and more. What are you hearing from co-ops about their intentions, and how is NRECA helping them apply for this money?

Thomas: There’s a lot of interest in the opportunities created by the infrastructure bill, whether that’s broadband, grid resiliency, cybersecurity, electric vehicles or clean energy. In a lot of ways, the process that created these programs is just the beginning. There will be regulatory processes of various lengths that will provide details about what applications for those funds might look like.

Our goal is to provide as much information to our members as possible so they can make good decisions about what opportunities match up with their strategic priorities. NRECA has developed an infrastructure hub on cooperative.com that provides detailed information to our members as these programs and funding opportunities emerge. And we will continue to partner with our members to make sure they get as much value out of these opportunities as possible.

Last year, the House passed a sweeping budget reconciliation bill that included direct-pay incentives for co-ops to develop clean energy technologies and a $10 billion voluntary program for co-ops interested in transitioning away from fossil fuels. What do you see happening with those two legislative priorities this year?

Thomas: I’d start by saying that our efforts on the budget reconciliation bill were both offensive and defensive, including playing defense against potentially overly aggressive and burdensome clean energy targets. We think we did a good job in defending against those unreasonable mandates. At the same time, there are several good opportunities for co-ops included in the House-passed bill and in ongoing Senate negotiations, including direct-pay incentives for energy technology and the $10 billion in clean energy transition funds.

As we begin 2022, we are in much the same place, with uncertainty remaining about the size and the shape of a bill that can pass the Senate. The Senate has committed to try to continue to find compromise on a bill that can pass. We continue to be well-positioned to defend against any bad policy mandates while protecting meaningful opportunities for co-ops.

If the Senate can’t reach a compromise, do you see other legislative vehicles for passing these co-op priorities?

Thomas: If the budget reconciliation process fades, we will look for other opportunities to push these priorities. These are the types of tools that meet co-ops where they are and give them voluntary incentives to implement their unique strategic plans. So, we’ll be looking for ways to advocate for these legislative priorities individually if the broader package fails.

There probably will be fewer opportunities for legislative work to get done as the election approaches, but we think these are strong priorities and we’re going to keep looking for other vehicles.

The Flexible Financing for Rural America Act was reintroduced last year and has attracted a great many co-sponsors in Congress. Do you see a path forward for this RUS repricing bill to pass this year?

Thomas: RUS repricing remains a top priority for us. It enjoys strong bipartisan support in both the House and Senate, so we think there’s still an opportunity to move it this year. It continues to remain an important opportunity for our members.

What are NRECA’s other legislative priorities for 2022?

Thomas: Broadband continues to be an important and ongoing issue among our members and an urgent need across rural America. It’s one of the few bipartisan issues in Congress, and it’s an issue that we will continue to focus on. Even though it doesn’t expire until 2023, the Farm Bill reauthorization process will start in earnest this year, and we will be doing the prework to make sure that the bill is as supportive of electric co-ops as it can be.

Another issue that we continue to watch closely is supply chain problems, so the advocacy team will continue to work with Congress and the administration to develop solutions to speed the availability of equipment for our members.

Erin Kelly is a staff writer for NRECA.

The House on Friday passed a $1.85 trillion spending package that includes direct federal payments for electric cooperatives to develop new energy resources and technologies, including renewable energy, battery storage projects, nuclear energy facilities and carbon capture.

The package still must be approved by the Senate.

“As electric co-ops work to reliably meet future energy needs at a cost that consumers can afford, they must have equal access to energy incentives and programs,” said NRECA CEO Jim Matheson.

The direct-pay provision would put co-ops on a level playing field with investor-owned utilities, which already receive federal tax breaks for providing power from solar, wind and other renewable energy sources and for investing in carbon capture.

The bill also provides direct-pay tax incentives for developing electric vehicle infrastructure, which a growing number of co-ops are pursuing.

Electric co-ops haven’t had comparable federal incentives because they are exempt from federal income taxes. NRECA has stressed that the Biden administration’s goals for reducing carbon dioxide emissions cannot be met without the participation of co-ops and municipal utilities, which together make up 30% of the electricity sector.

The legislation also includes $10 billion for a voluntary program in which the federal government provides grants and loans to co-ops that deploy renewable energy systems, energy efficiency or carbon capture, or retire their fossil-fuel power plants.

By retiring debt on fossil-fuel plants that are closing, the government would help ensure that co-ops aren’t stuck with stranded assets that they are still paying for after the facilities have shut down.

“The House bill would give co-ops access to direct-pay incentives for energy innovation and create a $10 billion program to support co-ops’ voluntary clean energy transition,” Matheson said. “This is appropriate recognition of the need to level the playing field for not-for-profit cooperatives, reduce costs and open new doors for innovation.”

Erin Kelly is a staff writer for NRECA.

NRECA CEO Jim Matheson is calling on Congress to include top electric cooperative priorities in key spending legislation this year that, if passed, will affect energy and climate policies.

The House returned from recess this week to consider legislation passed recently by the Senate, including a bipartisan infrastructure bill that includes $550 billion in new spending and a $3.5 trillion budget plan by Democrats that includes climate change initiatives.

“America’s electric cooperatives are focused on a reasonable approach to climate policy and energy supply that prioritizes the reliable, affordable and responsible delivery of electricity to every community,” Matheson wrote in an Aug. 23 letter to congressional leaders.

“As you consider legislation to promote clean energy development, adherence to these priorities will allow electric cooperatives to continue to meet the needs of the communities we serve.”

Specifically, Matheson asked top leaders in the House and Senate to include the bipartisan Flexible Financing for Rural America Act, which would allow co-ops to save more than $10 billion by refinancing their existing Rural Utilities Service debt at current interest rates without facing prepayment penalties. More than 500 co-ops hold outstanding RUS loans through the U.S. Department of Agriculture.

As of Aug. 24, the bill had 186 co-sponsors in the House and 29 in the Senate.

“In the cooperative business structure, those savings would flow directly back into the communities we serve in the form of new infrastructure investments and lower electricity rates,” Matheson wrote.

He also urged Congress to provide direct-pay tax credits to co-ops as incentives for developing clean energy projects, including wind, solar, energy storage, carbon capture and sequestration, and nuclear energy.

“As not-for-profit businesses, electric co-ops have been unable to use energy tax incentives that are available to investor-owned utilities,” Matheson wrote. “This significant disadvantage has, for many years, hindered co-ops’ ability to deploy new technologies.”

He also raised concerns about the inclusion of a clean energy standard in a spending package, warning that it could jeopardize co-ops’ ability to provide reliable, affordable electricity.

“The costs to serve rural America are significantly higher than other electric utilities and a clean energy standard could create a disproportionate burden on millions of low- and moderate-income families and small businesses,” Matheson wrote.

While opposing a burdensome mandate, NRECA supports funding for the Biden administration’s proposal for a voluntary incentive program to assist co-ops in the transition to lower carbon technologies, he said.

“This program—funded at a minimum of $30 billion for grants and loans—would provide financial incentives for carbon-reducing measures such as deployment of low-carbon electricity sources, debt relief for premature closure of fossil fuel generation and community-based energy efficiency programs.”

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

Erin Kelly is a staff writer for NRECA.

A flood-proof volunteer fire station in North Carolina and a much-needed dental clinic in Iowa are among the co-op-supported rural economic development projects receiving $14 million in loans and grants from the U.S. Department of Agriculture.

Electric and telecom cooperatives and municipal government agencies in 10 states received funds through the USDA’s Rural Economic Development Loan and Grant (REDLG) program, which provides zero-interest loans and grants for projects that create and retain jobs in rural areas. Eligible applicants are USDA’s Electric Program and Telecom Program borrowers.

“When we invest in infrastructure, we’re investing in the people of rural America to help create thriving communities where they can grow and prosper,” said USDA’s Justin Maxon, deputy undersecretary for rural development, in a July 27 statement.

Investments will go to projects in Illinois, Iowa, Kansas, Kentucky, Minnesota, Missouri, Montana, North Carolina, Ohio and Tennessee.

In North Carolina, Edgecombe-Martin EMC will pass a $300,000 grant to the Conetoe Volunteer Fire and Rescue Department to help replace a fire station that had flooded several times following hurricanes. The co-op is also contributing $60,000 in matching funds for the new, larger building, which is expected to go up by the end of this year.

Damage and high water from Hurricane Matthew, a Category 5 storm in 2016, “limited firefighters’ ability to get their equipment,” said Eddie Stocks, vice president of business and industrial development at the Tarboro-based co-op.

In Iowa, Wilton-based Eastern Iowa Light & Power Cooperative will use a $300,000 grant to help a local dentist renovate a new clinic. It’s the co-op’s second REDLG award to support rural dental practices.

“As more rural dentists are expected to retire, we want to do what we can so essential services, like dentistry, will be locally available in the future,” said Dave Mohr, the co-op’s manager of business development.

With the imminent retirement of Wilton’s current dentist, the new dentist wanted to begin her own practice. In addition to private financing and the services of a state dental referral program, the REDLG grant will help the new provider set up a larger clinic near the previous dental office. The new practice will also create three new jobs.

If the clinic had left the area, said Mohr, members would have to drive to neighboring communities to visit a dentist.

Victoria A. Rocha is a staff writer for NRECA.

Electric cooperatives working to boost their use of renewable energy need direct-pay incentives from the federal government to put them on a level playing field with for-profit utilities that get tax breaks, an Iowa generation and transmission co-op CEO told a Senate committee Tuesday.

Central Iowa Power Cooperative projects that more than 60% of its electricity will be generated by wind and solar by 2030, CEO Bill Cherrier told the panel. CIPCO provides electricity to 13 distribution co-ops serving nearly 300,000 people.

“It’s important for policymakers to note that the current federal tax credit structure prevents not-for-profit electric cooperatives like CIPCO from taking advantage of the tax benefit to directly build and own wind and solar generation assets,” he told members of the Senate Agriculture, Nutrition and Forestry Subcommittee on Rural Development and Energy.

“This requires cooperatives to work with third-party providers on long-term contracts to bring this energy onto the system…This unworkable incentive structure impedes the ability of cooperatives to adopt new technologies in a cost-effective way,” Cherrier said.

Investor-owned utilities receive federal tax breaks for providing power from solar, wind and other renewable energy sources and for using carbon-capture technologies. But not-for-profit co-ops and public power utilities don’t have access to those incentives because they are exempt from federal income taxes.

NRECA and its member co-ops are urging Congress to provide co-ops with direct payments to develop renewable energy and battery storage projects.

“With this legislative change, G&Ts like CIPCO would be better positioned to reduce the cost of wind and solar resources by building and owning them directly for the benefit of our member systems,” Cherrier testified.

He also urged the senators to pass the Flexible Financing for Rural America Act, which NRECA estimates would save co-ops more than $10 billion by allowing them to refinance their federal loans at current low interest rates without being hit with pre-payment penalties.

“While CIPCO’s excellent credit rating provides access to a number of financing resources, the RUS [Rural Utilities Service] remains a key partner for long-term success,” Cherrier said. “Over the last 30 years, RUS has supported CIPCO with more than $500 million in secured, long-term financing, particularly for transmission projects.”

“Recently, low interest rates have allowed utilities with commercial loans to refinance to lower interest rates, providing needed savings, particularly during the pandemic,” he said. “Unfortunately, this is not a current option with RUS loans.”

CIPCO would save more than $21 million if it could refinance its RUS loans, Cherrier said.

“As a not-for-profit electric utility, the interest savings would assist with rate stability, support additional infrastructure improvements and growth, and ultimately could be returned to members as additional patronage,” he said. “Investments we make today will continue grid viability and system success into the future.”

Erin Kelly is a staff writer for NRECA.

Efforts to provide electric cooperatives with direct federal payments to develop renewable energy and battery storage projects advanced in the Senate as a key committee agreed to include the incentives in a broader energy bill.

Senate Finance Committee Chairman Ron Wyden, D-Ore., said he plans to place the Clean Energy for America Act directly on the Senate calendar for a vote by the full chamber later this year.

Committee members split 14-14 on the legislation as members divided along party lines on May 26. But Senate rules allow the chairman to advance the bill to the full Senate when there’s a tie.

The bill includes language proposed by Sen. Michael Bennet, D-Colo., that would provide direct-pay investment and production tax credits to co-ops, publicly owned utilities and tribal governments for clean energy projects. The Joint Committee on Taxation estimates that the provision could result in $50 billion in payments over the next 10 years.

A similar bill being considered in the House, the GREEN Act, also includes direct-pay incentives for co-ops and publicly owned utilities.

For-profit utilities have long received federal tax breaks for providing power from solar, wind and other renewable energy sources and for using carbon-capture technologies. But not-for-profit co-ops and public power utilities haven’t been able to get those incentives because they are exempt from federal income taxes.

“We should make these tax incentives accessible to electric co-ops, public power companies and tribes,” Bennet said before the committee vote. “They are doing yeoman’s work to transition to clean energy and drive opportunity in rural America and we should support them.”

NRECA CEO Jim Matheson, American Public Power Association President/CEO Joy Ditto and Large Public Power Council President John Di Stasio wrote a letter to Bennet supporting his amendment.

“(This bill) allowed some utilities to immediately receive the benefit of certain energy tax credits,” they wrote on May 26. “With the inclusion of your amendment, it now also would allow public power utilities, rural electric cooperatives and Indian tribal governments to do so. That would mean more local projects, with local jobs, under local control. Having direct ownership as an option also will help our members develop a generation mix that best suits the needs of the customers.”

The overall goal of the bill is to consolidate 44 separate tax breaks into incentives for clean energy, clean transportation and energy efficiency, Wyden said.

“It will level the playing field because the same rules will apply to any and all who want to compete, from the biggest fossil fuel companies on down to the smallest renewable startup,” he said before the committee vote.

Erin Kelly is a staff writer for NRECA.

As the central Illinois economy begins to rebound from the COVID-19 pandemic, the last thing that Menard Electric Cooperative General Manager Alisha Anker wants to do is raise electric rates.

“People are just getting back to work as things are opening back up here,” she said. “If we had to go with a rate increase in 2021, that would be really ugly.”

But the Petersburg-based co-op may have little choice but to increase electric bills soon unless Congress passes legislation that would save it about $2.3 million in interest payments on $25.5 million in federal Rural Utilities Service loans. Like most co-ops, Menard used the loans for the construction and improvement of its system.

The Flexible Financing for Rural America Act would allow not-for-profit co-ops to reprice their RUS loans at today’s low interest rates—which they can’t do now without being hit with huge prepayment penalties. NRECA estimates that the legislation could save co-ops more than $10 billion nationwide. Co-ops would have 180 days after the bill’s enactment to apply for a rate adjustment.

Menard has already cut its budget, but it cannot continue to provide service to its 8,900 members at existing rates unless it gets some debt relief from Congress.

“I look forward to this bill passing,” said Anker, who has lobbied her congressional delegation to support the bipartisan legislation. “It could push off a rate increase for several years and help put the pandemic in the rearview mirror.”

Anker and other co-op leaders said the issue comes down to a matter of fairness.

“We’re not asking for special treatment,” said Randy Hauck, general manager and CEO of 12,500-member Verendrye Electric Cooperative in Velva, North Dakota. “We’re just asking to be able to do what every other business is able to do—and what homeowners are able to do when they refinance their mortgage.”

The co-op would use the $5 million to $10 million it would save by refinancing about $50 million in RUS loans to strengthen its infrastructure, Hauck said.

“Our plant is getting pretty old,” he said. “We would replace the parts built back in the ‘50s and ‘60s. The savings would make it possible for us to enhance the reliability, and maybe the capacity, of our system. And we could do it without raising rates.”

Kansas Electric Power Cooperative, a generation and transmission co-op in Topeka, will be able to hold down rates for the 16 distribution co-ops it serves if the RUS repricing bill passes, said CEO Suzanne Lane. That, in turn, will help stabilize rates for consumer-members down the line.

KEPCo has about $87 million in RUS debt from loans it used to pay for co-ownership in the state’s only nuclear power plant, the Wolf Creek Generating Station. It would save about $1 million a year—for a total of $20 million to $25 million over the remaining life of its loans—if Congress passes the legislation this year.

“All other things being equal, we could keep our rates stable and maybe even lower them,” Lane said. “It would be a big help for rural America.”

Tracy Bensley, general manager of Talquin Electric Cooperative in Quincy, Florida, also said his co-op could consider reducing rates if the bill is approved. Its 45,000-plus members include residents of one of the poorest counties in the state.

“It means we would not have to do a rate increase and it would possibly allow us to lower our rates this year,” he said. “I would love to do a downward adjustment. Without the ability to reprice our debt, we’ll most likely have to raise rates next year.”

Bensley and other co-op leaders say the sooner that Congress acts, the better. While still low, interest rates have crept up since last year, reducing the potential savings from refinancing.

For example, Talquin’s savings from refinancing about $88 million in RUS debt would range from $27 million to $40 million over the life of the loans, depending on interest rates.

RUS repricing would result in fewer dollars flowing into the U.S. Treasury, but it would put more money into the pockets of rural Americans to help jump-start the post-pandemic economy, Bensley said.

 “This is one way we can give new vitality to our economy,” he said. “Isn’t that the most important goal right now?”

Erin Kelly is a staff writer for NRECA.

NRECA is urging congressional leaders to provide electric cooperatives with direct payments to develop clean energy projects—giving them incentives comparable to the tax breaks granted to investor-owned utilities.

For-profit utilities have long received federal tax breaks for providing power from solar, wind and other renewable energy sources. But not-for-profit co-ops and public power utilities haven’t been able to tap into those programs because they are exempt from federal income taxes.

In a letter to top congressional leaders, NRECA, the American Public Power Association and the Large Public Power Council asked for direct payments to member-owned and community-owned utilities to help employ technologies such as battery storage, carbon capture and electric vehicle charging networks.

“Allowing public power utilities and rural electric cooperatives to receive these tax credits in the form of direct payments for building clean energy infrastructure would ensure that all utilities serving all Americans would have equal access to these federal resources,” said the May 14 letter, which was signed by NRECA CEO Jim Matheson, APPA President/CEO Joy Ditto and LPPC President John Di Stasio.

“The direct payments would be used to help offset project costs—increasing the incentive for further investments—and would enable public power utilities and rural electric cooperatives to own these facilities directly. It would also mean more local projects, with local jobs, under local control.”

The issue is one of NRECA’s top legislative priorities for this session of Congress.

The letter points out that co-ops and community-owned electric utilities together serve nearly 30% of all retail electric customers.

“The President and Congress have ambitious climate goals that cannot be met by leaving nearly 30 percent of the nation’s electric utility customers without access to incentives and support,” the three association leaders wrote.

President Joe Biden has set a goal of eliminating carbon dioxide emissions from the power sector by 2030 to help slow climate change. Matheson and the other association leaders called that “a daunting challenge” with a hefty price tag that must be borne in part by co-op consumer-members and public power customers.

“As such, we cannot afford inefficient or ineffective policies,” they wrote.

Erin Kelly is a staff writer at NRECA.

Updated: May 18, 2021

A bill that would save electric cooperatives more than $10 billion in interest payments on their federal loans has already won the support of nearly a third of Congress.

Broad bipartisan support for the Flexible Financing for Rural America Act is crucial to ensuring that the legislation will be included in any infrastructure package that Congress takes up this year.

As of May 18, the bill had attracted 135 co-sponsors in the 435-member House and 27 co-sponsors in the 100-member Senate.

The legislation, offered initially last year, was reintroduced in Congress in late March. NRECA and its members are continuing to seek lawmakers’ support for the bill as co-ops work to recover from the economic battering caused by the COVID-19 pandemic and look ahead to reinvesting in the communities they serve.

“This bill is attracting strong bipartisan support in Congress because it’s a commonsense solution,” said Louis Finkel, NRECA’s senior vice president of government relations.

“Co-ops are simply asking to be able to take advantage of lower interest rates like other businesses do, without being hit with onerous penalties. This legislation is key to helping co-ops and their members move forward out of the pandemic into renewed economic growth.”

The pandemic reduced demand for electricity from many commercial and industrial co-op members, including hard-hit oil companies, agricultural producers and tourism-related businesses. Some residential members also suffered job losses and other financial hardships and have struggled to pay their electric bills.

NRECA economists have estimated that co-ops could lose as much as $10 billion in revenue through 2022 because of the pandemic. Based on current interest rates, NRECA estimates that about 500 co-ops could realize a total net savings of $10.1 billion from repricing $42 billion in direct and guaranteed RUS loans.

President Joe Biden is negotiating with members of Congress over the size and scope of a sweeping infrastructure bill. In addition to possibly allowing RUS loan repricing, the legislation could include investments in rural broadband and electric vehicle charging networks.

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

“Rural electric cooperatives are critical to economic success in small towns and rural areas across Minnesota,” Smith said. “We ought to support them so they can continue to boost our infrastructure, all while supporting jobs and improving Minnesotans’ quality of life.”

Hoeven said the bill “is about reinvesting in our rural communities, passing savings on to consumers and further supporting efforts to continue overcoming challenges from COVID-19.”

“Families and businesses living and working in rural communities across North Dakota and the country depend on these cooperatives and the critical services they provide,” he said.  

Erin Kelly is a staff writer for NRECA.

More than 1,500 electric cooperative leaders from across the country will host online meetings with over 350 members of Congress this week as part of NRECA’s annual Legislative Conference, CEO Jim Matheson told reporters Monday.

Co-op CEOs and directors are essential in helping lawmakers understand how key energy issues affect local constituents, Matheson said during a virtual news conference.

“That connection back home is really significant for us in terms of our identity with elected officials,” he said.

Co-ops will be advocating for three major issues during the virtual conference:

• Repricing Rural Utilities Service loans so that co-ops can benefit from today’s low interest rates without being hit with prepayment penalties.
• Investing in broadband to help close the digital divide that has left many rural areas behind.
• Providing comparable incentives to tax-exempt co-ops for energy innovation.

On the RUS debt issue, co-ops are urging Congress to pass the bipartisan Flexible Financing for Rural America Act, which could save co-ops more than $10 billion in interest payments on their loans. Matheson said NRECA is pushing lawmakers to include the legislation in the infrastructure package that they are expected to take up later this year.

“I have yet to meet anyone who doesn’t support this idea, although we all know it’s hard to get anything through Congress these days,” he said.

Matheson called broadband “an essential aspect of life” that is still being denied to more than 23 million people in rural America. More than 200 co-ops provide high-speed internet service to their consumer-members, and co-op leaders are calling on Congress to support broadband financing that gives priority to projects in areas with the lowest population density.

Tax-exempt co-ops that want to invest in innovative energy technologies also are looking for direct federal incentive payments comparable to the tax incentives paid to for-profit utilities, Matheson said. Because they don’t pay federal taxes, co-ops and municipal utilities—which together make up 30% of the electric utility industry—aren’t able to take advantage of incentives for renewable energy, carbon capture, battery storage and other technologies.

“We just want parity,” Matheson said. “The direct-pay method seems to be where consensus is growing on Capitol Hill.”

In answers to reporters’ questions about President Joe Biden’s climate change policies, Matheson said he doesn’t think it’s realistic to eliminate all carbon dioxide emissions from the power sector by 2035.

“Zero carbon by 2035—we think that’s an overly ambitious goal,” he said. “We’re having trouble seeing how we get there. Where’s the technology today that can allow that to happen, to get all the way to zero?”

Co-ops are concerned about how climate policies will affect their primary goal of providing reliable, affordable power to their members, many of whom live in high-poverty areas, Matheson said.

“What are going to be the commercially viable, always available and affordable carbon-free technologies to provide electricity?” Matheson asked. “People can set goal X, Y or Z, but are the lights going to go on whenever consumers flip the switch? And will they be able to afford it? Those are the questions we’re asking.”

Erin Kelly is a staff writer for NRECA.

The U.S. Department of Agriculture has approved $598 million in loans for 11 projects, most of them at electric cooperatives, to improve and modernize rural electric infrastructure for delivery of affordable, reliable power to thousands of residential, commercial and agricultural consumers.

Low-interest loans will go to nine co-ops across the country, in addition to the Navajo Tribal Authority in Arizona and ASP2 Rural LLC in Maine. About 460,000 rural residents and businesses will benefit from this round of funding.

Several loans will help expand smart grid technologies, “a catalyst for broadband and other telecommunications services in unserved and underserved rural areas,” the USDA said in its March 16 announcement.

“Now is the time for our nation to make significant investments in infrastructure—roads, bridges, broadband and energy—to improve quality of life and support good-paying jobs, transition to a clean energy economy, and keep the United States poised to lead the global economy,” said Agriculture Secretary Tom Vilsack.

Minnkota Power Cooperative, headquartered in Grand Forks, North Dakota, will receive about $80.5 million in loans to fund 98 generation and power delivery projects, specifically rebuilding power lines and substations and upgrading aging infrastructure.

“We have power lines and substations on our system today in very rural areas that are in some cases 50 to 60 years old,” said Ben Fladhammer, the director of communications for the generation and transmission co-op, which serves 11 member co-ops spread throughout 35,000 square miles in eastern North Dakota and southwestern Minnesota.

“We’ve reached a point where those resources have served us well, but it’s time for us to rebuild or replace them and integrate new technologies and really position our area and our system for the future.”

Smart technologies will modernize many of those substations, Fladhammer noted. “We will have access to more data in the field so that when we go out into our service territory for an issue we will know ahead of time where to start.” 

In Missouri, Intercounty Electric Cooperative Association received a $15 million loan, which it will reinvest in its system for maintenance and upgrades over the next five years. The loan includes $432,000 in smart grid technologies.

“The availability of these loan funds lowers the required amount needed from co-op members through electric rates,” said Heather Satterfield, director of communications at the Licking-based co-op.

Victoria A. Rocha 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 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.

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.

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.

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:

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.

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.

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.

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: 

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.

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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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