When Kristen Taddonio paid her first electric bill at her new home in Grand County, Colorado, she automatically became a member and co-owner of the Mountain Parks Electric cooperative. Last year, she decided to run for a seat on the Mountain Parks board of directors. Her goal was to push her cooperative toward affordable and reliable renewable energy. As the former Director of Climate Choice at the Environmental Protection Agency, and a current senior advisor at the Institute for Governance and Sustainable Development, she was confident she had the knowledge and experience to help guide her co-op in the right direction.
More than a year after she was elected, Taddonio has a new perspective on the obstacles that her cooperative and others like it face on their paths toward providing sustainable electricity. For Mountain Parks Electric, the barriers had little to do with the cost of renewable energy or member interest in transitioning to sustainable power.
Instead, she discovered that Mountain Parks Electric and RECs across the country are trapped in decades-long contracts with Generation and Transmission Cooperatives (G&Ts). “What I found out, after getting on the board, was that the previous board of directors had signed a long-term contract with this coal-heavy power provider, that extended originally until 2040, and then they extended that until 2050.”
Not only does the contract force Mountain Parks Electric to continue to buy energy from Tri-State, a generation and transmission cooperative that relies heavily on coal power, but it also prevents the REC from receiving any more than 5% of its electricity from locally generated sources.
According to Taddonio, Mountain Parks Electric is facing “a very common situation that many Rural Electric Co-ops find themselves in.” In practice, this means that many RECs have no freedom to pursue sustainable energy, either by purchasing it from other contractors or by generating it themselves.
Taddonio sees this kind of contract as damaging to individual RECs, as well as a violation of foundational cooperative principles. “One of the seven core principles of RECs is autonomy and independence, and another core principle is voluntary membership and participation,” she said.
“The contract acknowledges that we have a right to leave the contract, but we have to pay a lot of money to do that, and unfortunately that amount is not clear. Last year we asked Tri-State for an estimate of the buyout figure, but they have totally ignored that request.”
However, other cooperatives that tried to buy out of their contracts with Tri-State were presented with buy-out numbers in the tens of millions of dollars, a price that most member-owned and operated rural cooperatives simply cannot afford.
In Colorado, where Taddonio lives, renewable energy can be cheaper than coal or natural gas. According to Taddonio, solar and wind energy can be purchased at 2 to 3 cents per kilowatt hour, while Tri-State, which primarily generates its electricity through high-carbon sources such as coal and natural gas, charges 7 to 8 cents per kilowatt hour.
Katie Rock, a representative of the Sierra Club’s Beyond Coal Campaign in Iowa, says that generation and transmission companies’ continued reliance on coal is contrary to the logic of the energy market. “If people were making these energy production decisions solely based on the market, coal would be gone.”
But companies continue to burn coal primarily because of the massive investments they’ve already made in the coal supply chain and in coal plants.
According to a report published by the Center for Rural Affairs, along with several other non-profits, generation and transmission companies have an estimated $7 billion of loans left to pay off for coal plants and other investments in high-carbon energy. Although researchers have shown that “the U.S. could save $78 billion by closing coal plants,” these loans make it almost impossible for G&Ts to do so, despite the demonstrated long-term environmental and financial benefits.
Rock sees the possibility for change on the horizon but acknowledges there is still much work to be done. “Either the balance sheet has to be so compelling that it is undeniable that you need to make this shift, or you need new leadership that makes this a priority.”
Moving Toward Sustainable Solutions
Several solutions to this problem, including debt forgiveness, coal debt refinancing, and credit asset swaps, were outlined in Washington Governor Jay Inslee’s ambitious climate plan as part of his platform as a candidate for the 2020 Democratic presidential nomination. Many of his proposals were later incorporated into the climate plans of Senator Elizabeth Warren as well as Senator Kamala Harris, who is now the Democratic nominee for Vice President.
The likelihood of these federal policies being enacted depends almost entirely on the November presidential election. But some action can also be taken at the state and local level. “Colorado recently passed a climate bill that is going to require electric utilities to significantly clean up the power that they offer to members, and because of that Tri-State was forced to develop a plan for how they were going to reduce emissions,” Taddonio said. Tri-State then found that they could save money by replacing two coal power plants in Colorado and New Mexico with renewable energy, reducing their emissions by 34%.
Regardless of G&T agreements, cooperatives themselves can play an important role in updating America’s energy grid and helping the U.S. to reduce its carbon emissions. John-Michael Cross works with the Environmental and Energy Study Institute (EESI) to help RECs to develop sustainable policies.
Watch a Full Conversation on Rural Electric Co-ops on Friday, October 30 during
“Because of their relatively unregulated nature, co-ops can push through really interesting ideas and serve as clean energy laboratories in a way that most other utilities cannot,” Cross said. Some innovations include on-bill financing and beneficial electrification programs, both of which help to reduce energy consumption and lower the cost of members’ electric bills.
The Promise and Perils of Co-op Governance
RECs first became part of America’s energy landscape in 1936 as a part of the New Deal era Rural Electrification Act. The cooperatives were created in order to provide power to rural Americans in areas where traditional Investor-Owned Utility companies refused to operate because they didn’t think the cost was worth the investment.
Over eight decades later, around 900 RECs distribute power to 11% of the population, using 42% of power lines and covering 75% of land area in the United States.
RECs, like other cooperatives, are owned and controlled by their members. This means that the people who are using the service, in this case electricity, have a say in the way that the business is run. Unfortunately, REC governance in practice is rarely able to live up to its democratic ideals. Chronically low voter turnout among members, lack of transparency about open board seats, and often completely unregulated elections undermine the integrity of RECs’ democratic system.
Because Rural Electric Cooperatives are governed by a democratic model, they are regulated very differently from Investor-owned and municipal utility companies. The assumption is that because cooperatives are democratic in principle, regulatory oversight that might impede on RECs’ democratic processes should be limited.
This difference in regulation gives RECs more freedom to pursue a variety of programs, that increase efficiency and lower costs, without direct oversight from the state. But according to Taddonio, this can be both a blessing and a curse. “The truth is that just as easily as [RECs] can do the right thing, they can also do the wrong thing.”
But despite these issues, those involved in RECs are optimistic that the cooperative model can help the country adapt to the challenges posed by climate change. Katie Rock points to energy districts which have been set up in northeastern Iowa as a model that demonstrates the potential of RECs.
The districts, which are non-profits started through a USDA program, assist people with the technical and financial aspects of energy efficiency for homes and businesses, including installation and maintenance of solar panels and wind turbines. “To me it’s a great model of what clean energy in rural places can be. It can be an employer, it can reinvest local dollars in the local community” Rock said.
Expanding renewable energy across the country benefits everyone by reducing carbon emissions. But the impact on the rural communities served by RECs is even greater. According to Rock, when rural electric cooperatives work to expand localized green energy programs, “we’ll see more resilient rural communities, more resilient farms and businesses.”