Updated: May 20, 2019
South Carolina Gov. Henry McMaster signed a bill May 17 that would require the state’s 20 electric cooperatives to publicly disclose the salary and benefits paid to board members and ban trustees from using their positions to profit from other business dealings with their co-ops.
The legislation, which also subjects co-ops to oversight by state regulators for the first time, was passed by the Senate on May 8 after being approved by the House in March.
The bill grew out of a 2018 controversy involving the former board of trustees of Tri-County Electric Cooperative in Saint Matthews, South Carolina. Reporting by The State newspaper in Columbia revealed that the co-op’s trustees had received an annual salary of nearly twice the state average for co-op board members.
The newspaper also reported that trustees held an unusually high number of meetings—50 in 2017 alone—and collected a $450 allowance each time. According to the newspaper, some of those meetings lasted only 15 minutes. Trustees also allegedly received health insurance through the co-op.
After being informed by some outside advisers that their salary and benefits may be excessive, the trustees proposed bylaw amendments to limit their compensation. However, some trustees then reversed course and lobbied co-op members to vote against the changes, narrowly winning. That prompted the resignation of two concerned trustees.
The co-op’s consumer-members ultimately removed the remaining board members. Before they were removed, those trustees tried unsuccessfully to fire Tri-County Electric CEO Chad Lowder, who had been concerned with their actions.
Lowder, who continues to lead Tri-County with a new board, said he and the current trustees support the bill passed by state lawmakers.
“I think it’s good legislation,” Lowder said. “It provides some overarching guidance, but it doesn’t over-reach. It doesn’t take the authority from the membership, which is where it belongs.”
The bill, first introduced by Rep. Russell Ott, a Democrat whose district includes Tri-County Electric, gives the state Office of Regulatory Staff the power to conduct governance audits of co-ops. After an audit, the agency must report its findings to the co-op’s management and board and work to resolve any compliance issues that are identified. If there are disputes between regulators and a co-op, the state Public Service Commission has the power to resolve them.
Co-op boards must publicly disclose, by May 15 of each year, all compensation and benefits paid to board members. Directors cannot fill temporary board vacancies with their family members. Board members and their families are banned from having any other business relationship with the co-op—such as doing construction work.
The legislation also requires co-ops to notify their members at least 30 days before an annual meeting or any special meeting that includes an election. Polling places for the election of board members must be open before and after normal working hours to allow more consumer-members to participate. Directors and others are not permitted to campaign where members are voting.
“I think this is a step toward restoring trust,” said Mike Couick, president and CEO of the Electric Cooperatives of South Carolina.
Couick said he’s already been asked to speak to co-ops in 10 states about the issue. He also served on a governance panel at NRECA’s Annual Meeting in Orlando, Florida, in March to talk about what happened.
As painful as the Tri-County episode was, it ultimately proved that the co-op model works, Couick and Lowder said.
“Literally, the community took their co-op back,” Couick said. “It was the right time to focus on what makes a co-op work.”
Lowder said it took about six months from the start of the controversy for the co-op process to correct itself.
“I don’t know where else you can find a business model that can fix itself that quick,” he said.