A Question of Power: Race and Democracy in Rural Electric Co-ops

By Henry Leifermann with Pat Wehner

Vol. 18, No. 3-4, 1996 pp. 3-15

Throughout rural America, few institutions are as powerful, economically significant, and effectively unregulated as electric and telephone membership cooperatives. In the South–the section of the United States with the highest proportion of rural and poor residents–co-ops control up to fourteen billion dollars in total assets. Having expanded to include far more than the electric lines that first brought power to the countryside, these combined resources represent the capacity to construct a better future for the rural South through homegrown economic development, job creation, and the improvement of local infrastructures. Designed to be democratic, with each customer entitled to a vote, the co-ops have instead often functioned as private reserves of capital for local elites. In areas like the Black Belt, self-selected boards of economically powerful whites have dominated management of the co-ops through intimidation, misinformation, and blatant manipulation of electoral procedures. This special issue of Southern Changes reflects on the fourteen year history of the SRC’s Co-op Democracy and Development Project, surveys the issues affecting utility co-ops today, and raises questions about how these institutions can become a progressive force in the rural life of the South and the nation.

Fifteen miles east of Baton Rouge, in the small Louisiana town of Denham Springs, the board members of a rural electric cooperative, recognizing their ability to provide more than utility service to the local community, have turned an unused office building and adjoining ware-houses into a “business incubator.” The Dixie Business Development Center provides its tenants with services that range from copy machines to market counseling, encouraging local entrepreneurs to establish self-sufficient businesses and “graduate” into their own facilities. As of this spring, two and one-half years after its startup, the Center has assisted in the creation of thirty-five small businesses with 256 new jobs in home health care, low-income housing construction, and other skilled trades and services.

About 225 miles to the north, in the Mississippi Delta, community leaders trying to improve life in their desperately poor region no longer bother to ask their local co-op for help. Although the Delta Electric Power Association of Greenwood serves a population that is about forty percent African American, members of its all-white board of directors–local land barons who have a history of charging residential users more than twice the rate large farmers pay to irrigate their fields–have routinely reappointed themselves without holding an election. “I think the fact that people don’t come out [for

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meetings] is a vote of confidence in the board,” the Delta EPA general manager told The New York Times; “They must be satisfied with the way we are running things.”

Many of the differences between these two examples of what rural utility cooperatives can become, and what they too often have been, can be traced to events that occurred thirteen years ago. In 1983, a coalition of white and black customers of the Dixie Electric Membership Cooperative of Baton Rouge–customers who are also, by definition, members and owners of the co-op–staged a democratic revolt that culminated in the election of a new board of directors. Since then their electric bills have decreased and their eco- nomic prospects have increased.

That same year, customer-members of Delta EPA attempted a similar quiet rebellion. When they showed up to vote at the co- op’s annual meeting, however, the entrenched, all-white Delta board of directors simply walked out and re-elected themselves in virtual seclusion two months later. To this day the board members have gotten away with it.

What happened in 1983 at the Dixie and Delta rural electric cooperatives was the result of the first year in a unique campaign for social justice, a campaign still going on today with its eyes on the prize of jobs, economic opportunity, and in turn, community development for the rural South. A series of local organizing efforts coordinated by the Southern Regional Council, the “Co-op Democracy and Development Project” adapted some of the lessons learned from the civil rights movement, antiwar protests, and grassroots environmental activism. But most often this campaign for democratic participation and rural economic opportunity has been unpublicized, its tactics unconventional. Detective work, coalition building, and member education drives were crucial elements in efforts to secure more accountable, representative, and democratic control of the co-ops and their considerable resources. “The idea was to get the co-ops more actively involved in the development of their areas,” recalls Oleta Fitzgerald, former project director of the Co-op Democracy Project. “We saw it as a way to jump start economic development.”

During months of investigating individual co-ops, Fitzgerald and the project staff routinely found excessive rates, inefficient operations, punitive collection policies, padded executive salaries, and discrimination in co-op investments and hiring. “I think back and remember people–maids–would tell me that they’d seen co-op bills in the big houses where they worked, and that those utility bills would be much, much less than what the maids paid for service in their old shacks,” Fitzgerald says. These and other abuses often went unchallenged because of misinformation, a lack of consumer under-standing, and blatant manipulation of election procedures. Co-op employees frequently collected signatures authorizing the bearer to vote in another member’s name; at meetings, board members cast hundreds of these “proxy” votes, although bylaws often included strict limits on the number of proxies that could be cast by a single member. Because real democratic participation might help achieve a more equal distribution of co-op benefits as well as build a solid foundation for future economic development in rural communities, ending this tradition of exclusion, discouragement, and powerlessness became the primary goal of local organizers.

Still, the opposition to reform was, and continues to be, considerable. Steve Suitts, executive director of the SRC during the first thirteen years of the Co-op Democracy Project, writes about the project in “Empowerment and Rural Poverty,” an essay published as part of the book Rural Poverty in America.

Far from being an isolated case, the exclusionary practices of the Delta EPA board of directors serves as an “example of both the abandonment of the democratic process and blatant hostility toward poor Black participation among the electric cooperatives,” Suitts writes. When criticized, “Delta’s general manager vehemently denied allegations of racial bias, justifying the co-op’s self-perpetuating history with explanations that echoed the sentiments of past racist voter registrars in the South: ‘I think the fact that people don’t come out is a vote of confidence in the board.

Black Belt Co-ops:
“Part of a Strategy for Change”

Throughout the cultural landscape of rural America, few institutions are as powerful, economically significant, and effectively unregulated as the local electric and telephone membership cooperatives of the Rural Utilities Service (RUS), the U.S. Department of Agriculture agency known prior to 1994 as the Rural Electrification Administration (REA).

The co-ops are unique financial institutions, with access to the cheapest money in the nation: federal grants and loans at interest rates of zero to seven percent. They can use this money not only to finance their own utility-related operations, but also to invest–in low-cost housing construction, industrial parks, business incubators, and other community projects which can potentially cre-

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ate jobs far beyond those at the co-op itself.

During fiscal 1995, the rural co-ops got $16 million in grants and $11.2 million in zero-interest loans to spend specifically on such job-generating projects. That $27.1 million is pocket change to the federal treasury and even to most city or state budgets, but in the financially impoverished rural counties in the area of the South sometimes described as the “Black Belt,” that much money can lead to a job which can be the difference between a life in poverty and a life with prospects.

By the definition used to outline the initial scope of the Co-op Democracy Project, a Black Belt county is one with no more than sixty thousand residents, of whom at least 33 percent are African American and 15 percent or more are living below federal poverty lines; historically, the population of these counties was majority-black during three or more of the decades between 1900 and 1980.

On the map, this Black Belt forms a great, thousand-mile arc which sweeps southwest from the Tidewater of Virginia, then west across the Atlantic and Gulf coastal plains to the Mississippi Delta, Arkansas, and Louisiana (see map on page 8). It is an area of vast factory farms and small farm towns, of natural resources that sustain the profits of absentee corporate landholders and local residents who enjoy little of the economic success of the metropolitan South. “In the rural Black Belt,” a 1993 SRC report observed, “federal and state leaders have failed to provide any meaningful support or solutions that replace the agricultural economies which disappeared long ago.”

Nor have many lasting solutions resulted from high-profile anti-poverty campaigns. “The past failure or limited impact of scores of programs and millions of dollars to effect change in the rural South has several causes,” notes the Southern Rural Development Initiative (SRDI),

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a consortium of twenty-one organizations working in a number of distinct Southern regions, such as the Penn Center (South Carolina Sea Islands), the Delta Foundation (Mississippi Delta), and the Appalachian Community Fund (Appalachia). The majority of economic development programs “were externally initiated, designed, and driven. They were narrowly focused, quick-fix ventures, either grossly underfunded, or big bucks in pursuit of unrealistic expectations.”

In contrast, the Co-op Democracy Project was founded on the idea of community control . Moreover, its focus on utility co-ops represents a strategic shift–from introducing new programs to ensuring a full range of local participation in institutions which are already, as Suitts notes, “critical parts of the infrastructure of rural areas.” Describing the project’s significance, Suitts writes, “To establish a movement to bring about fundamental change to address rural poverty that can succeed where other movements have failed, the democratic control of rural economic institutions must be part of the strategy to change. In rural places like the Black Belt, the existing utility cooperatives are one of the first and most important economic institutions that the poor can help control.”

Democracy Co-opted

In theory, few institutions of any kind were created to follow such purely democratic procedures as the rural utility co-ops. First conceived as a New Deal relief agency, the REA was formally established in 1936 to supply loans, expertise, and training to farmers who collectively constructed their own distribution lines, bringing electricity to areas the public utilities regarded as too unprofitable to serve. Once the lines were completed, every customer who bought electricity from the local cooperative was considered a co-op member with a vote. Each year, the members would meet to elect a board of directors, who in

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turn set policy and hired managers. New Deal supporters and government publicity encouraged a vision of the REA as far more than a public works program, heralding the co-ops as “democracy at work.”

In May 1939, when the Delta EPA brought electricity for the first time to the cotton fields of the Delta in the northwest quarter of Mississippi, the Bolivar County News published a special edition to celebrate. One of its articles addressed the new co-op customers: “Bear in mind, Mr. and Mrs. Cooperative Members, that you helped build the rural electric line; that you help maintain the service, and that you are actually one of its owners.”

But despite the rhetoric and good intentions, prominent white planters in the Black Belt encountered little organized opposition to running their local co-ops as they saw fit. “I think the high ideals of the New Deal were frequently not implemented in the South,” comments Robert J. Norrell, a professor of history at the University of Alabama. “Of course there are two ways of looking at that. One is that the agencies in Washington accepted hypocrisy. The other way of looking at that is they set the goals, but in a polity like ours–where power is divided at the national, state, and local levels–there is a certain set of obstacles about implementing ideals in Sunflower County, Mississippi, that are enunciated in Washington. And especially when in places like all of these Black Belt counties, there is an extreme bias against racial equality, against participatory democracy.”

Absent genuine opportunities for participation, the co-ops were taken for granted in time, just like electricity. Having witnessed the manner in which government programs were repeatedly manipulated by local white elites, African Americans had particular reason to conclude the co-ops offered little for them. Some customer-members dismissed their rights and responsibilities as not worth the trouble; almost none went to the annual meetings to elect or re-elect directors. Eventually, few remembered or even knew they had the right to do so.

Left to their own devices, the affluent board members’ priorities included cheap electric rates to their own large farms, especially for uses such as irrigation, while residential users were often charged more than double the cost per kilowatt-hour. While providing minimal services to other residents, some boards and managers used co-op funds for memberships in all-white country clubs and other personal expenses. At the same time, boards perpetuated their rule by manipulating election bylaws and by using co-op resources to gather proxy votes and ballots for themselves–sometimes offering green stamps or even cash prizes in return for proxies. No one, not even REA officials in Washington, appeared willing to stop them. Unchallenged, with co-op members purportedly uninterested in operations, these men simply reappointed themselves year after year. By the time the civil rights movement won freedoms and brought political activism to African Americans living in the Black Belt, decades of tradition had firmly established the co-ops as fiefdoms run by powerful white men.

So it came as a shock to the management of co-ops across the South when word first spread that a campaign was mobilizing to oust them.

A Venture Into Unknown Territory

The Co-op Democracy Project had its quiet beginnings in 1982, with months of intensive research, investigation, and data collection. Almost immediately, the project staff found out how little anyone knew about the workings of an REA co-op. Early progress reports note that the Federal Power Commission claimed little jurisdiction, state public service commissions kept few records, and local governments “control only the placement of poles for electric lines.” In areas like rural Mississippi, simply

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discovering the extent of a co-op’s service district could be a monumental task which involved “reading very detailed descriptions of where boundaries run according to local landmarks and plotting them on a county highway map.”

Legal research was necessary to document violations of the co-op bylaws, but “a review of the indexes of all major legal journals in the past thirty years revealed not one single article on the laws or regulations governing utility cooperatives,” forcing the staff to locate relevant state laws and court decisions on their own. While in the process of compiling this information, the researchers also took advantage of opportunities to observe the co-op management firsthand. When the co-ops’ trade and lobbying organization, the National Rural Electric Cooperative Association (NRECA), held its annual meeting in Atlanta in 1982, SRC personnel collected reports and attended presentations: “One staff member attended a plenary session and was the only black person in a room of almost 1,000.”

In all, the Co-op Democracy Project targeted twenty-one Black Belt co-ops during 1983, from Mecklenburg in Virginia to Sumter in south Georgia to Black Warrior in Alabama. The plan was to rally African American customer-members to attend the next annual meeting of each co-op, elect their own new directors, and turn co-op resources to addressing broader community needs. In preparation, the project staff arranged a series of unpublicized meetings in seven Black Belt states with other groups involved in community organizing, energy issues, economic development, and civil rights. In North Carolina, for example, the meeting included representatives from the Center for Community Self-Help, the Graham Center, the Institute for Southern Studies, the Migrant and Seasonal Farmworkers Organization, the North Carolina Hunger Coalition, North Carolina Legal Services, and the Twin Streams Education Center. As a result of these meetings, a list of “targeted” co-ops was generated. The staff began traveling from service district to service district, briefing designated contact people in each county.

‘We had a good deal of discussion about how secretive we had to be,” Fitzgerald says about planning for the 1983 “takeover” attempts. “For one thing, I had to be concerned about personal safety, because I was traveling up and down roads and in corn fields and all kinds of stuff,

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and alone most of the time. Another reason was the only way to win an election was a sneak attack, and even that was difficult to do because of proxy reporting deadlines and member registration requirements.” As the campaign progressed, organizers found the aura of secrecy sometimes added to a sense of unity among participants, but coalition building and member education proved equally important. In a project director’s memo Fitzgerald reported, “It was amazing to see that people really did not pay much attention to what their co-ops were doing. Most never thought much about, or took seriously, their membership status. Some didn’t know they were members.”

It Was Going To Be a Hard Nut”

Mississippi would become a high priority state for the Co-op Democracy Project, and three rural electric co-ops in the Delta were among the targets of the initial organizing campaign. One, Twin Counties EPA in Hollandale, “had not held an annual meeting with a quorum over the last ten years and, therefore, had not held an election during that time.” Twin Counties had been scouted by project staff for more than a year, including a visit to the annual meeting, where “three blacks were present– the project staff member, the accompanying co-op member, and the janitor.” Reports describe the proceedings, noting, “The twelve board members were seated across the front of the room. Eight or nine other white men came in, and stood around chatting with the board and looking strangely at the two blacks” there to attend the meeting.

According to field reports, when time came to vote on members of the co-op’s board of directors, “the co-op manager stated that there were nine co-op consumer-members present and he held 569 proxies, 270 of which were eligible to vote. He therefore acknowledged a quorum with no explanation of why so many proxies were found invalid. Apparently, the EPA staff had requested the proxies when people paid their electric bills. The board members whose terms had expired were named, and they were re-elected to a new three-year term by vote of the manager’s proxies.”

As part of their effort to reform Twin Counties EPA, community leaders and project staff sponsored a series of fish fries and town meetings, concentrating the education drive in areas where members were likely to be. Three challenge candidates, two black and one white, campaigned in their own communities. But when the next annual meeting of the co-op was held, the threatened board members had rallied support and the script changed very little:

“On the morning of September 20, rain began to fall and by the time of the annual meeting that afternoon

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there was a steady downpour. Approximately two hundred people attending the meeting supported the challenge candidates and almost three hundred supporters were present for the incumbent board members. The incumbent members also carried with them a large number of proxies. At one point, members of the [co-op] staff were seen handing proxies to white members as they came into the area for registration.” (This tactic bypassed co-op regulations limiting the number of proxy votes an individual could cast.) “When the final tally was counted, the vote was 1,909 for the incumbents and 189 for the challenge candidates.”

In the course of the twenty-one campaigns, organizers and project staff encountered threats, physical intimidation, frequent manipulation of election procedures, and the use of racially-charged rhetoric to rally white support for incumbents. “After each event we learned something,” says Fitzgerald, “in each locale we learned a new trick and tried to use it in the next place. As I remember it now, the pressure was on to make something happen and we needed to have a win to encourage funding. But it became clearer and clearer to me after talking to local people that it was going to be a hard nut. They had too many ways to beat us.”

In the face of this overwhelming opposition community leaders won only one board of directors election–the Dixie EMC in Louisiana. Unable to continue the field campaign at the level of funding needed for success, the Co-op Democracy Project turned to research and adopted a new goal: confront the REA in Washington with statistics on co-op elections and operations which the agency simply could not ignore.

Fighting to Exist

In the years that followed, thousands of work-hours were expended to extract documentation of discrimination and illegality from required REA and RUS paper-work, from census tract reports, and from the co-ops themselves. Meanwhile, both local co-ops and the RUS unexpectedly found in the late 1980s and 1990s that they were fighting for a reason to exist.

The legislation which originally created the co-ops had done so because private utilities claimed it was too expensive to extend power lines to the farms, ranches, and small communities of rural America; but in an era of federal budget cuts, with both electric and telephone service now everywhere in rural America, both Republican and Democrat administrations have lately begun asking: Why do we need these co-ops at all anymore? Today it may be that the co-ops cannot survive without adopting the goals of the Co-op Democracy and Development Project, becoming indispensable agents of economic and social improvement for the South’s Black Belt and all of rural America.

Some fourteen years after the Co-op Democracy Project began and seventeen months after “an urgent and direct appeal” to the Department of Agriculture, the federal bureaucracy has started to respond. In January 1996, seven senior RUS officials were selected by administrator Wally B. Beyer to form a “Cooperative Governance Team” to encourage member participation in federally funded co-ops, as well as to “work to remedy several problems among borrowers where democratic cooperative procedures appear to have been compromised.” Although not intended to act as an enforcement unit, the Governance Team was expected to “coordinate remedial measures,” according to Beyer’s directive. Moreover, “If these efforts do not prove successful, RUS will look into alternative measures, such as stronger regulatory language and/ or stricter compliance procedures.”

Whether veiled warnings about unspecified future sanctions will get the attention of co-op board members in the Black Belt remains to be seen. Accustomed to listening to no one, their political clout–from the courthouse to the state house to Congress–is often more than that of the RUS itself. As it happens, perhaps the most intense pressure on co-ops to do the right thing will come not from a federal agency, but from the threat of being swallowed up by a private, investor-owned utility. Beyer suggested as much in a May 1996 letter, which reminded local co-ops that democratic participation was sound insurance in a “highly competitive infrastructure environment.” In plain English, that warning meant co-ops better get customer-members involved in honest elections or those same customers might vote “yes” to a buyout offer from a Duke or Alabama Power Company, private corporations eager to profit from a system pre-installed at government expense.

The situation developing now has more than its share of ironies. While all but unchecked in their local operations, the co-ops have been protected since their inception by federal regulation of the electrical industry, which set boundaries for exclusive service areas. But as “competition” and “consumer choice” are promoted as the corporate family values of a pro-business Congress, the same investor-owned utilities that once refused to extend their service to rural areas are hoping to “cherry pick” the co-ops’ most desirable customers–large industries and now-surburbanized areas. If this happens, co-ops could be forced to either hike the residential rates for the remaining rural customers or submit quietly to a merger. While the threatened buyouts would effectively end the privileged misrule of the white co-op boards, the entire Black Belt stands to lose from such an outcome as well, as

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a potential agent of economic development and community empowerment would become answerable to no one outside the confines of Wall Street.

“A Vast Resource for Rural Development”

A takeover by a well-financed private power company is only one part of the bad news local co-ops face today. With services long since extended to the countryside, the Clinton Administration has considered cutting federal subsidies to the RUS and its co-ops, while the last three Republican administrations–Bush, Reagan, and Nixon–sought to eliminate the agency altogether. Supporters of the subsidies point out that those same utility lines, with far fewer customers per mile than in metropolitan areas, still need to be repaired after storms, replaced after wear, buried underground for durability, and adapted as technological advancements occur. In fact, say advocates of the co-op system, the entire debate about a cutback in subsidies as one more way to lower the deficit is more broadly a debate about rural America’s place on the national map; attempts to gut or eliminate RUS seem to be part of a continued devaluation of rural life.

But seen from a national perspective in the current climate of deficit reduction, the RUS has an image problem which sometimes turns this monument to the New Deal into a symbol of federal government waste. Major newspapers and magazines have filled their columns with exposes showing how RUS co-ops bring subsidized power or telephone service to the posh resort towns of Hilton Head, Aspen, and Vail. In 1990, about 25 percent of all REA/RUS telephone loans went to five holding companies which made a stock market fortune buying small telephone co-ops which serve suburban, not rural, communities. With its own administrator, Gary Byrne, leading the effort to dismantle the REA under the Bush administration, reporters hardly needed to investigate for these excesses: sources within the agency handed the documentation to them. While Byrne has since been replaced as administrator by the more committed Wally Beyer, RUS continues to be a significant source of some of its own public relations problems, having retained a policy of lending to any co-op serving an area which has ever been designated as “rural” (originally defined as a town of less than fifteen hundred inhabitants) regardless of income level.

And yet, confronted by powerful enemies and subjected to intense media scrutiny, the local co-ops, their lobbyists in the NRECA, and RUS advisors are finally considering some institutional changes which seem reason for guarded optimism. While co-ops will remain in the electricity and telephone business, it recently has been suggested that water and sewer services should become a major priority. USDA surveys estimate almost one million rural households in the nation face “critical needs” for safer water supplies due to contamination of community wells or antiquated water treatment. According to the Census Bureau, less than half of all rural families get their water from public systems, and less than one quarter of rural families have sewer service.

The former manager of a North Dakota co-op which engaged in community development activities, Beyer has indicated that beyond improving infrastructure, an even more expanded mission might be possible. Calling rural America “a vast untapped resource,” the RUS administrator has told interviewers that “The [co-ops] need to stretch themselves in more of a rural development advocacy role. They need to be a meaningful part of their communities.”

Longtime observers have adopted a wait-and-see attitude toward these proposed transformations. “I would say it would be total window dressing if it wasn’t for Wally Beyer, unless they are able to beat him down ’til it’s time for him to leave and he won’t get anything done,” says Fitzgerald, who, following her tenure as Co-op Democracy Project director, worked at the USDA during a period that overlapped with Beyer’s appointment.

“A War In Itself”

Local observers are also waiting to see if the USDA carries through on its promise to change the co-ops. “We need all the help we can get here, and the electric co-op could–if it would–be a lot of help,” says Robert E. Moore, a political leader in the Mississippi Delta. As a Leflore County commissioner, Moore’s district includes portions of the 19,000-person town of Greenwood as well as a large rural section of the 37,000-person county. Including Moore, four of the five county commissioners are African American, as are four of the seven Greenwood city council members.

Since the 1980s, African-American control of local political institutions has been on the increase throughout the black-majority towns and counties of the Delta and the Black Belt, but in nearly every locale, political empowerment and the ability to elect one’s candidate of choice has not meant economic change for millions of rural Americans, black and white. In 1994, portions of six Delta counties just to the west and northwest of Greenwood were designated a “rural empowerment zone.” About 30,000 persons live in the Mid-Delta Empowerment Zone, most in towns with populations of a thousand or less, or in isolated clusters of farm homes. Almost all are black and almost all live below the federal poverty line.

The Mid-Delta Zone is one of only three rural areas in the nation taking part in an experimental program begun by the Clinton administration in 1993. About $2.5 billion

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in tax incentives and $1 billion in flexible grants have been budgeted for the program under its ten-year plan. Moore serves as one of the commissioners on a task force, the Mid-Delta Empowerment Alliance, which guides residents in applying for the $40 million-plus in grants, loans, and tax incentives being made available to the Mid-Delta Zone. “The empowerment zone takes that whole concept of ‘from-the-bottom-up,”‘ he says. “Rather than looking to the outside, the residents do it themselves. Housing, education, jobs–whatever the people look at as the number one problem in their community.”

Advocates of community-based development share Moore’s positive evaluation. In partnership with its member organizations and supported by a $500,000 grant from the Department of Agriculture, the SDRI consortium of nonprofits hopes to expand the empowerment zone con-

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cept to other parts of the rural South, in part by seeking the participation of local utility co-ops. The added gains would be high: from 1989 to early last year, more than $18 million in loans and $2.5 million in grants were made by the RUS to co-ops in the South under the Rural Economic Development Loan and Grant Program, while matching supplemental funds for those 109 loans and seven grants totaled $158.6 million. Through the Southern co-op programs, more than 5,600 jobs were created–a relatively small number, but one which could mean a lot in areas like the empowerment zones.

The potential for close coordination, mutual assistance, and pooling of resources between the co-ops and other community-based initiatives is already in place. Perhaps the most basic example is that the same federal department which officially regulates the utility co-ops–the USDA–also oversees the empowerment zone experiment, including the Mid-Delta Zone. Moreover, much )f what the Mid-Delta Zone hopes to accomplish already s in progress in Denham Springs and other small Louisiana towns where Dixie EMC’s economic development programs have had proven effect. But one obstacle to a combined effort remains: the Mid-Delta Zone gets its electricity from the same Delta EPA co-op which turned is back on its customer-members in the board of directors election of 1983.

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Moore recognizes the potential but knows the co-op’s history of serving the already privileged. By way of an example, he notes that while cotton still ranks among the kings of the Mississippi Delta economy, very few Delta residents, black or white, make a living planting, harvesting, processing, or selling cotton. “It’s all mechanized. However, we don’t have structures in place to allow blacks to buy land and be cotton farmers,” Moore says. “This would be an excellent opportunity for the co-op to come in and provide capital. There’s not a great deal of access to capital. Getting a small loan is like pulling hen’s teeth around here.” Similarly, while the Dixie EMC has attracted small service providers and even some specialized industry to rural Louisiana, in the Delta, “Investors are ready to invest in low-income areas because of the tax credits, but we don’t have the training to get into the financing procedures with them. The co-op does.”

The present shift in RUS priorities provides a final example of how co-ops could be a catalyst for community development in the Delta. Already the agency has persuaded some local co-ops to help remedy public health problems related to water and sewer services. By mid-1995, there were 116 local co-ops involved in some way in water utilities and fifty-four involved in wastewater projects. The Delta EPA is not one of them. In the Mid-Delta Empowerment Zone, “There are lots of little water and sewage districts, none big enough to support itself,” says Moore. “Their systems are falling apart. We really need a larger, regional service to improve the system.”

Could the Delta co-op get involved in community economic development or coordinate a regional water system? “Delta? That’s a war in itself. That’s another fight, and I don’t know if I’ve got that much time or energy to spend on that,” Moore says

A Question of Organizing

For its part, Delta EPA maintains that it serves the needs of its co-op members, whether their democratic participation helps to define those needs or not. Recently, co-op sponsored economic development in the Delta has included no-interest loans to catfish farms and processing plants, helping to subsidize a regional industry known for its exploitative working conditions and resistance to fair labor representation. As elsewhere, such questionable investments result from a definition of economic development that emphasizes industrial recruitment, tax incentives, and the promotion of a “favorable business climate,” over concerns for a safe and democratic work-place, equal opportunity, and industries which are accountable to the local community. Kenny Johnson, outgoing director of the Co-op Democracy Project and the Southern Labor Institute, summarizes the dilemma facing activists who want a greater degree of community participation in economic decisions, asking, “How do you balance your desperate need for some development with not giving away the whole store?”

Reflecting on the fourteen-year history of the Co-op Democracy Project, Johnson remains convinced that more inclusive co-ops can play a prominent role in helping to resolve these difficult economic issues to the benefit of entire communities, rather than increasing the wealth of a select few. While the strident opposition local organizers encountered in their 1983 efforts to reform Black Belt co-ops illustrates “the clarity of the need for RUS and USDA to have standards and enforcement policies to insure democratic procedures and elections,” Johnson also believes the campaign can proceed on more immediate fronts. In particular, “African-American state legislators have a role to play in making the changes happen. They can call for public hearings and for legislative investigations.”

But if the moment has arrived to revisit the co-op reform campaigns, local activists will once again lead the way. “These are predominantly black areas, so clearly there ought to be black people in the structure of Black Warrior,” says Spiver Gordon, a member of the Eutaw City Council and president of the local chapter of the Southern Christian Leadership Conference in Greene County, Alabama.

A veteran of the effort to democratize Black Warrior Electric Membership Cooperative, the co-op serving the largest geographical area in rural Alabama, Gordon admits that changing the co-ops will not be easy. “It’s going to take an organizational effort,” he says. “The problem is first, educating people about the process. Then getting community leaders from those places to select somebody to run that everybody would support. I think it can be done. I think it’s a question of organizing.”

The Southern Regional Council’s Co-op Democracy and Development Project was directed by Ken Johnson and Steve Suitts. Funding for the project was provided by the Ford Foundation, the Norman Foundation, and the Public Welfare Foundation. The Carnegie Corporation also supports the publications work of the Council.

Fitzgerald Recalls Twin Counties Challenge

In an October 1983 report, Oleta Fitzgerald, then project director of the Co-op Democracy and Development Project, describes the annual meeting of Twin Counties Electric Power Association, a utility co-op in Hollandale, Mississippi. Fitzgerald had been working with co-op customers, local attorneys, and members of Mississippi Action for Community Education (MACE) to organize support for a slate of reform candidates, the Twin Counties Coalition, which hoped to challenge incumbent co-op board members in the scheduled election:

“Twin Counties members told me that there were subtle forms of voter intimidation at the annual meeting that an outsider would not have noticed. For instance, although he is said not to have been a `voting member,’ there was this guy who was responsible for making sure no one without member status got past the chain roping off the balloting area. He was renowned for his segregationist views, and looked the part. He did an excellent job of keeping attorney Johnny Walls and me on the outside of the chain. He is said to have been very active in discouraging black voting during the ’60s.

“On the surface, Twin Counties officials were very cordial–they wouldn’t let us in, in a very nice way.”

In an interview in the spring of 1996, Fitzgerald, now Southern Regional Director of the Children’s Defense Fund’s Black Community Crusade for Children based in Jackson, Mississippi, reflected on the entrenched opposition the Co-op Democracy Project encountered in the Twin Counties election:

“In Twin Counties, we realized that there were members of the white community that were aggravated by the co-op boards as well; they were low-down to anybody that didn’t have money. Folks could be sick and they’d turn the lights off on them. They couldn’t get any redress.”

Co-op Participation Rates at Annual Meetings

State	Co-ops surveyed∗	Total Customers	%Black Customers∗∗	%Black Attendance∗∗∗	%Black Board Members	%Women Board Members
Alabama	8	117,308	28.2%	30.8%	8.7%	8.7%
Arkansas	5	66,031	15.5%	13.2%	0%	0%
Florida	2	50,078	18.7	19.5%	5.6%	11.1%
Georgia	20	298,690	20.7%	28.3%	8.2%	6.0%
Louisiana	6	137,864	21.7%	28.1%	7.1%	10.7%
Mississippi	13	225,523	30.9%	17.7%	5.8%	5.8%
N.C.	5	57,664	32.9%	51.7%	26.1%	13.0%
S.C.	11	201,287	33.0%	42.0%	12.7%	10.0%
Tennessee	2	41,245	23.4%	23.7%	5.3%	5.3%
Texas	1	23,870	14.1%	17.6%	11.1%	11.1%
Virginia	5	87,634	27.9%	32.8%	10.4%	10.4%
Total	78	1,307,194	25.8%	35.2%	9.1%	7.6%

Despite estimates which understate total black membership by three to five percent, the above survey data reveals a continuing exclusion of minorities from the co-op leadership, even though minorities make up a high percentage of those attending annual meetings. Percentages in Arkansas show that none of the five Black Belt co-ops surveyed had black board members. Eight of the thirteen Mississippi Black Belt co-ops surveyed had no black members on their boards. In Georgia, seven of twenty Black Belt co-ops had no black board members and an additional eleven had only one black voting member.

*SRC surveyed co-ops in which at least ten percent of the members were black and which served at least part of a Black Belt County. A Black Belt county is one with less than sixty thousand residents, of whom at least thirty-three percent are African American and fifteen percent or more are living below federal poverty lines. The population of the counties was majority black during three or more of the decades between 1900 and 1980.

* *Racial data from the RUS is only available for residential customers. The number of customers is generally higher than the total number of voting members because individual members can potentially count as several residential customers if they have several lines (to a house and a barn, for example). Consequently, the percentage of black customers listed above may be three to five percent lower than the percentage of black board members.

***The percentage of voting members attending the 1995 annual meeting who were black.

Source: The Rural Utilities Service’s Reports of Compliance and Participation (REA Form 268) for fiscal year 1995.

Co-op Participation Rates at Annual Meetings

State	Co-ops surveyed∗	Total Members	Members Present	%Members Present∗∗
Alabama	7	96,121	3,403	3.5%
Arkansas	5	51,554	1,929	3.7%
Florida	2	43,133	825	1.9%
Georgia	20	273,396	7,629	2.8%
Louisiana	6	129,562	938	0.7%
Mississippi	13	228,633	1,104	0.5%
North Carolina	5	51,200	1,672	3.3%
South Carolina	11	176,874	17,008	9.6%
Tennessee	2	40,855	489	1.2%
Texas	1	25,206	387	1.5%
Virginia	5	79,494	1,505	1.9%
Total	77	1,196,028	36,889	3.1%

The above data collected from seventy-seven Black Belt co-ops in the South reveals a profoundly low total participation rate. In 1995, the Black Belt co-ops had just 3.1 percent of their members turn out to vote at the annual meeting where the boards of directors were elected. A more extensive survey of 131 co-ops in the South revealed an even lower 1995 turn out rate of 2.5 percent. In both the Black Belt and the wider surveys, Mississippi and Louisiana are the states with the lowest levels of participation. When mail-in or the much misused proxy voting are included (and RUS forms regretfully do not make the important distinction between the two), levels of participation increase only slightly. For the 131 co-ops surveyed in 1995, only six percent more of the members voted through proxy or mail.

* SRC surveyed coops in which at least ten percent of the members were black and which served at least part of a Black Belt County. A Black Belt county is one with less than sixty thousand residents, of whom at least thirty-three percent are African American and fifteen percent or more are living below federal poverty lines. The population of the counties was majority black during three or more of the decades between 1900 and 1980.

**Members present at 1995 annual meetings.

Source: The Rural Utility Service’s Co-op Financial and Statistical Reports (RUS Form 7) for period ending December 31, 1995.

Debt Write-Downs Unlikely To Impact Development

Over the past several months, the U.S. Department of Agriculture has begun what is expected to be a multi-billion dollar write-down of debts incurred by the rural electric cooperatives’ power suppliers. For those interested in seeing co-ops aid local development, this news raises three important questions: Which co-ops are in debt, how did they get into this financial situation, and how does this affect the capacity of co-ops to generate economic development?

The institutions in debt are the generation and transmission plants (GTs) set up by rural electric cooperatives to supply them with power. As of October 1996, officials with the Rural Utilities Service considered nineteen GTs to have at least some financial problems. Of these GTs, nine are on the RUS’s “troubled borrower” list. The RUS is working closely with these nine to restructure their debts and has already agreed to write down about $1.9 billion in federal loans for several, mostly mid-Western and Western GTs. For three GTs in Utah, Illinois, and Kansas, this means that they will now have to pay only a combined $840 million of their $2.74 billion debt.

In the South, only one GT–Cajun Electric Power in Louisiana–is considered a troubled borrower. Cajun is one of four GTs which declared bankruptcy, and its debt problems are consequently in the hands of the federal courts, not the RUS. Oglethorpe Power in Georgia has been able to remove itself from the troubled borrower list largely on its own, through a mixture of debt refinancing and strategic use of independent “power marketers,” who broker power from a variety of sources.

The GTs classified as troubled borrowers got into severe debt largely because of their investments in nuclear power in the 1970s. Most cooperatives did not become large enough to start grouping together and investing in their own power plants or GTs until the 1970s.

During this decade, the federal government was fearful of a long-term energy shortage and consequently prohibited the use of natural gas to generate power and encouraged both co-ops and private utilities to invest in nuclear power. After the Three Mile Island nuclear accident in 1979, however, the costs of nuclear power plants skyrocketed and the GTs’ small investment in the plants suddenly became billions instead of millions of dollars. To make matters worse, the high interest rates during the 1970s meant GTs were often paying double-digit interest on the loans they received to invest in these plants. By the 1990s, some GTs were paying hundreds of millions of dollars in interest alone.

According to RUS spokesperson Claiborn Crain, those GTs on the troubled borrower list, particularly those who have had their debts written-down, will have a more difficult time acquiring additional loans from the RUS. However, the debt situations of various GTs will not impact the largely separate economic development loan and grant program for co-ops, he said. These loans go not to GTs but to the distribution co-ops, such as those studied by the SRC. None of the distribution co-ops are on the troubled borrower list, Crain said. In addition, economic development loans are handled by a separate department of the USDA, the Rural Business and Cooperative Service Department.

Henry Leifermann is an Atlanta-based free-lance writer whose work includes the book Crystal Lee, adapted for the movie “Norma Rae.” He is a New York Times magazine contributor and former Newsweek correspondent. Additional research and writing for this article was done by Pat Wehner, a graduate student at Emory University.

Massive Electrical Resistance: The Struggle for Democracy at Mecklenburg Co-op

By Henry Leifermann and Preston Quesenberry

Vol. 18, No. 3-4, 1996 pp. 16-17

For well over a decade, Cora Tucker, a civil rights activist and founder of the grassroots organization Citizens for a Better America, has been working to get African-American candidates democratically elected to the board of directors of the Mecklenburg Electric Co-op in Virginia, located on the North Carolina state line near I-95. African-American members have never elected one of their own candidates to the co-op board, despite making up more than a third of Mecklenburg’s customers, says Tucker.

Currently, two of Mecklenburg’s eleven board members are African American, but African-American communities did not nominate either of them as candidates, Tucker says. In order to get people on the board who are selected by and accountable to local communities, Tucker and her supporters have been mailing out letters to all of the black churches in the service area, alerting their leaders to the upcoming board election in June of 1997 and asking them to consider whether they or anyone else in their congregations might be interested in running. The letter also informs them about the board’s responsibilities and about the resources it controls.

“People don’t understand what the board does,” Tucker says. “The board decides who gets the grants and who gets the loans. If we could get someone elected at least we could know what’s going on. We’d know what money is available, and how we can apply for these funds. There’s a lot of things we could get done if we worked together.”

If the letter-writing effort succeeds in initiating a grassroots reform campaign, Tucker believes candidates will face formidable obstacles to actually being elected. One of the most persistent barriers to fair representation is the election system itself; although candidates run as representatives of separate districts within the co-op service area, each voter is allowed to cast a ballot for every district. Although eliminated in most governmental elections because it discriminates against black populations by diluting the effects of their votes, this “post-at-large” system of voting is still common in many co-ops.

Tucker notes that even getting the names of their candidates on the write-in ballots that Mecklenburg mails out to its customers will prove a difficult task. Four or five months before its June annual meeting, Mecklenburg will mail out ballots with the names of candidates already printed on them, and Tucker and her supporters have yet to figure out how to get their own candidates’ names on these ballots. “We’ve tried and tried,” she says. “We’ve called and written them letters, saying `Look, we would like to have some input before you print the ballots.’ They never wrote back or called back, and they just keep sending out these ballots with names already printed on them.”

At least now the Mecklenburg board of directors “goes through the motions” of holding a democratic election through mail-in ballots, Tucker says. For years, board members simply re-elected themselves at their annual meetings or violated co-op bylaws by electing their chosen candidates though the use of large numbers of proxy votes–ballots gathered from members who often were uninterested in who controlled their co-op.

The 1983 Campaign: Democracy Postponed

Local African-American leaders first challenged this use of proxy votes in 1983. With support from the Co-op Democracy Project, three black men ran for election to the board that year, while Tucker and other community organizers arranged to show up at the annual meeting with enough supporters to vote the reform candidates

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into office. Five days before the meeting, however, the co-op board realized its intention to vote more than seven thousand proxies would probably be challenged. The co-op manager and his staff worked through the weekend before the Tuesday election, phoning and visiting members to get them to attend the annual meeting in person.

The meeting was scheduled to begin at 6:00 p.m. By 5:30, a mile-long line of automobiles carrying white co-op supporters stretched in front of the co-op offices. By eight o’clock, when voting began, more than twenty-five hundred co-op members were in attendance. News reports observed that not even the local football games had attracted such a sizable crowd of local residents in recent history. The opposition candidates and their supporters were overwhelmed. After the election, Tucker returned to her rural home around midnight to discover someone had broken in and soaked her bed with heating oil while she was gone.

Three weeks later, Dr. Curtis W. Harris of Hopewell, president of the Virginia chapter of the Southern Christian Leadership Conference, held a news conference and called for a state investigation of the Mecklenburg election. In a statement, Harris observed that control and accountability were the election’s central issues: “A group of members became concerned that low-income residential users of all races were subsidizing the electric bills of large dairy farmers and mechanized tobacco farmers using lots of irrigation and electricity.” Harris said that at that time, forty-three percent of the co-op’s customer-members were black, but the Democracy Project could not reach many of those potential voters to seek their participation in the election, because co-op management charged $500 for a copy of its list of members.

After the loss in the 1983 election, “people were so devastated that it was hard to get them to turn out at meetings,” says Tucker. Even if members could have been rallied, the board has changed its procedures so that showing up at annual meetings has become an ineffectual strategy for electing new directors. Largely be-cause of the challenge to incumbents in the 1983 election and Harris’s subsequent call for a state investigation, the Mecklenburg board began mailing out ballots to its members. Now, by the time members show up at the June annual meeting to nominate their own candidate, “everybody’s already gotten their ballots in the mail and sent them back,” Tucker says.

A Different Type of Development

Henry Liefermann and Preston Quesenberry –H.L. AND P.Q.

Vol. 18, No. 3-4, 1996 pp. 19-21

It took a coalition of whites and blacks to win the only election victory at a local utility co-op during the original Co-op Democracy Project efforts in 1983. Working together, the reform coalition successfully elected five new candidates to the board of directors of the Dixie Electric Membership Cooperative in Baton Rouge, Louisiana. What has happened since that victory serves as an example of both the opportunities offered by cooperatives and the difficulties in maintaining full democratic participation.

Coalition and Change

Dixie EMC serves parishes circling the metropolitan Baton Rouge area, including both suburban and rural areas. Dixie’s suburban customer-members are a largely white population, while the rural areas are populated mostly by African Americans, who currently make up about a third of Dixie’s members.

In mid-February 1983, the Dixie campaign began with the usual meeting to inform local activists and community leaders about the Co-op Democracy Project and to enlist their support in the upcoming effort. Participants included representatives from the Louisiana Legislative Black Caucus, the Southern Cooperative Development Fund, and the Louisiana Hunger Coalition, along with a number of welfare rights activists.

Unknown to Project organizers, another group already had formed in hopes of changing the membership of Dixie’s board of directors. Its members — almost all white and residents of the Baton Rouge suburbs–had adopted the name “Dixie Watch.” Staff from the Co-op Democracy Project began meeting with representatives from Dixie Watch, and a loose coalition developed. Time was short because Dixie EMC’s board of directors election was scheduled for late April, two months away.

The Co-op Democracy-Dixie Watch coalition had one other rarity working in its favor. Unlike almost all other Black Belt co-ops, Dixie EMC’s election procedure was simple and direct. It took signatures from one per-cent of the customer-members (or about 450 members at that time) to nominate a candidate for the board. Voting was done by mail, and the infamous use, usually misuse, of voting by proxy was not allowed, meaning the incumbent board could not re-elect itself simply by gathering proxies from hundreds of disinterested customers and co-op members. Finally, the directors were elected by district, and not through at-large voting.

Dixie Watch agreed that its voters would support two candidates backed by the Co-op Democracy Project in election districts where some of its mostly white supporters lived. In return, the predominantly black Co-op Democracy Project participants agreed to support three Dixie Watch candidates in districts where they lived. When the votes were counted, all five new candidates backed by the coalition were elected to the board of directors of Dixie EMC.

At the first meeting of the Dixie board following the elections, two incumbent board members resigned. They were replaced by an additional two new directors, and the seven new members of the Dixie EMC board totalled a majority. To symbolize the change, the new board officially changed their co-op’s name from Dixie EMC to DEMCO in 1984.

“Quiet” Aftermath

Presently, four of the candidates elected in 1983 are still serving on DEMCO’s board; of its thirteen members, eleven are white and two are black.

Each year between 1985 and 1989, anywhere from two to five new candidates ran against incumbent DEMCO board members, and one to two new members were elected each of these years with the exception of 1989. A quorum was not reached, however, in any of the elections between 1985 and 1988, since DEMCO’s bylaws require fifteen percent of the co-op’s members to mail in ballots for a quorum and an average of only 12.5 percent of members did so. Still, because a quorum was reached in the candidates’ specific districts, the elections of the new board members were valid.

In the 1990s, things have been even more “quiet,” according to DEMCO’s head of marketing, Mark Bonner. Incumbents have not been challenged and quorums have

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generally not been reached. After a quorum of 18.6 per-cent of the members mailed in ballots in 1990, an average of only 7.6 percent of members mailed in their ballots over the next five years. While the number of mail-in ballots has been unimpressive, the turn-out at DEMCO’s annual meetings has been far worse: in the 1990s, less than two members on average have showed up at annual meetings.

Eugene Traylor, one of the five reform candidates elected in 1983 and president of the DEMCO board since 1990, admits the new management has not been able to bring about a marked increase in democratic involvement, but says it has attempted to do so by changing the co-op’s bylaws. Although Dixie’s election procedure was already simple and direct relative to most co-ops, DEMCO’s new board of directors made it even simpler. Before 1984, for example, candidates needed to get signatures from one percent of the members to get their names on the ballot; because of bylaw changes made by the new board only fifty signatures are required now. In addition, candidates in 1983 could be validly elected from their district only if their was a quorum in every district, including their own. Since 1985, candidates have only needed a quorum in their own districts. Finally, in the interests of gender equity, new bylaws clarify that both husband and wife are members who can cast their household’s one vote, while previously each household could have only one member as well as one vote.

Traylor says the board has also been able to come through on its central campaign promise–lower rates. DEMCO’s residential customers saw their rates fall from 10.5 cents per kilowatt-hour to just under eight cents.

Incubator for Development

Traylor also included economic development initiatives among his list of the board’s accomplishments. In 1992, DEMCO secured a $100,000 zero-interest loan from the RUS’s loan and grant program to help a hospital furniture company based in St. Helena Parish expand its operations, creating ten jobs in the process. A fire truck assembly company based in Baton Rouge also needed to expand its operations and was planning to relocate out of state; instead, a $400,000 no-interest RUS loan secured by DEMCO encouraged Ferrara Fire Apparatus Company to relocate to the tiny Louisiana town of Holden (population 500). The company transferred seventy-five employees from its old site and hired seventy-five new ones from Holden and the surrounding area.

DEMCO is not particularly extraordinary among co-ops in the extent to which it has taken advantage of RUS loans and grants, nor in many of the specific ways it has used them. More unique is DEMCO’s Dixie Business Development Center (DBDC). The center is one of only about 500 to 600 such “business incubators” in the country, very few of which are sponsored by utilities and fewer still by co-ops. In Louisiana, only one other co-op (South-west Louisiana in Lafayette) sponsors a business incubator and no investor-owned utilities sponsor one.

DEMCO started its own incubator in 1993, after it moved from its former facility. Now, the utility’s former facility is available for office, manufacturing, and warehouse space. Tenants in the center receive flexible leases, utilities, secretarial services, janitorial services, telephones, copiers, data and word processing, and marketing, business, and financial counseling. After anywhere from six to thirty-six months, tenants are expected to “graduate” into private sector facilities. The center also helps aspiring entrepreneurs set up businesses in other locations, by providing them with financial counseling and helping them secure bank loans.

In all, DBDC has helped thirty-six entrepreneurs to start up businesses, which, in turn, have generated 256 new jobs. Sixteen of these businesses are currently located at the actual development center in Livingston Parish, while the other twenty are spread throughout six parishes in Louisiana and one county in Mississippi. Three of these businesses are owned by women and another three are owned by African Americans.

Aspiring entrepreneurs throughout the state hear about the incubator largely through an A.M. talk radio show called “Spotlight on Business,” hosted by DBDC executive director Bob Fouchard. The show attracts hun-

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dreds of Fouchard’s listeners to his center each year.

Fouchard says he gives priority in the competition for DBDC space and services to those who have firm financial backing, some prior business experience, and a workable plan. “We go through a pretty good pre-screening process,” Fouchard said. “About ninety percent of the people who come in here don’t qualify to start up a new business, largely because they don’t have any money and they want someone to loan them a bunch of money. We’re trying to help people go into business who are logical to go into business.”

Recently, the RUS has approved a $400,000 grant (which DEMCO will match with $80,000) for the expansion of the DBDC–the first-ever RUS loan for a business incubator.

Rural Economic Potential

By providing the support services and counseling for some local residents to become entrepreneurs, incubators like the Dixie Business Development Center may represent a better strategy for rural economic development than more traditional strategies of industrial recruitment. With entrepreneurship, economic development is done by rural residents (if only a handful) rather than to them by outside developers who receive a generous package of “incentives” (tax credits, no-interest loans, free land) and a disproportionate share of the benefits. But, as Fouchard’s comments indicate, incubators can only help a small minority of the rural South’s residents–those who already have a significant amount of capital to invest in their own business.

In addition, there are no guarantees that the average seven to eight workers employed by the incubator’s local entrepreneurs will have more democratic control over their work environments than employees of transplanted businesses. Nor can one assume they will receive higher wages that provide an adequate family income. Finally, there is no guarantee that the businesses “graduating” from the business incubator–which will be run first and foremost in the interest of private profits–will necessarily work in the interests of the larger community of DEMCO’s customers-members who are helping to subsidize the DBDC.

If DEMCO’s members were to become more actively involved in their co-op, however, a different type of rural economic development might be possible–a type democratically controlled and specifically designed to serve the community’s needs as its members see them.

Private Interest Law: The Case Against Delta EPA

Preston Quesenberry

Vol. 18, No. 3-4, 1996 pp. 22-23

Challenging an institution as tricky to define in legal terms as a rural electric cooperative can prove a difficult task. An unsuccessful lawsuit filed in 1983 against the Delta Electric Power Association provides a vivid demonstration of some of these inherent complexities.

The plaintiffs in the case of Givens, et al. v. Delta Electric Power Association felt they had encountered a clear and egregious example of discrimination. Since 1967, the all-white Delta board of directors simply had been re-appointing itself at annual meetings without a quorum. Moreover, since the founding of the co-op in 1937, the board had never had a black member, despite the fact that forty-four to fifty-five percent of the co-op’s customer-members were estimated to be African American. Then in 1983, the board carried out a series of actions which seemed flagrantly designed to prevent the election of three African-American candidates.

For one, co-op officials refused to give the group of black Delta members supporting the challenge candidates a list of the names and addresses of cooperative members–a list necessary to mobilize black voters and secure proxy votes–until the day after the election. The co-op also changed the time of the annual meeting from 2 p.m. to 10 a.m., with the “apparent hope of dissuading members from attending,” in the candidates’ opinion.

Despite these obstacles, a record number of more than 100 African Americans (most of whom carried the three proxy votes allowed in the co-op’s bylaws) appeared at the April 12, 1983 meeting to vote their candidates into office. The incumbent board responded by announcing the absence of a quorum and abruptly adjourning the meeting without entertaining a motion made by the members, as required in the written bylaws.

After the incumbent board left the meeting, the assembled members continued the proceedings and elected eleven new board members, all of whom were African American. The incumbent board ignored this election, however, and called another special election for June 14, 1983. Meanwhile, the board continued to act in ways that black members interpreted as discriminatory. First, the directors amended the bylaws to allow each member to vote an unlimited number of proxies rather than three proxies, as was previously allowed. Then they printed and mailed out proxies to all of the members and ran an advertisement encouraging members to return their proxy–none of which had ever been done before. According to one of the challenge candidates, all of these actions had the effects of insuring “that the votes of black members, who are in the minority, will be diluted and cancelled out.”

At the June 14 meeting, no black Delta members and only forty white members showed up, but the all-white board used 7,587 proxy votes to declare a quorum and re-appoint themselves.

Justice Not Applicable

A federal class action lawsuit was filed on behalf of the co-op’s black members, in which the plaintiffs charged they were “deprived of their right, because of race, as members of the cooperative, to participate cooperative’s board of directors.”

In the ensuing four-year legal battle, however, federal district court judges ruled that many of the legal weapons commonly used by attorneys to fight racial discrimination in governmental elections were unavailable in the case of cooperative elections. For one, the attempted use of voting rights legislation was “frivolous.” one judge argued, because “Delta Electric is a private corporation and its corporate elections were limited to the cooperative’s members.” The use of constitutional amendments (in particular, the Fourteenth Amendment which ensures due process and equal protection) was also unfounded, the judge said, because “Delta Electric is a private corporation, which cannot be liable for a constitutional deprivation.”

Realizing they were dealing with a private and not a governmental entity, the plaintiffs’ attorneys believed their best weapon against the co-op was Title VI of the Civil Rights Act of 1964, which states that federally-funded institutions cannot act in ways which intentionally discriminate or have discriminatory effects. Delta, like all co-ops, receives federal funds in the form of no- or low-interest loans from the Department of Agriculture.

However, the court ruled that there was no direct relationship between the federal funds Delta received and the way it allegedly discriminated. The judge argued

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that Delta did not use its loan funds to carry out elections but only to construct, operate, and upgrade its electrical distribution system. Therefore Title VI was only applicable, the judge said, if Delta somehow discriminated in providing electrical service to its customers. The plaintiffs tried to convince the court that Delta did discriminate against blacks in providing service, but the judge ruled the evidence in fact indicated “that predominantly black neighborhoods received better treatment.”

According to Paul Sonn of the NAACP Legal Defense Fund, this reading of Title VI–which required a direct “nexus” between the federal funds used by a program and the specific manner in which the program discriminated–was common in the early- to mid-1980s. In 1984, the U.S. Supreme Court upheld this way of reading Title VI in Grove City College v. Bell.

But in 1988, the U.S. Congress decided that Title VI was meant to offer broader protection against racial discrimination in federally-funded institutions and passed the Civil Rights Restoration Act. The act states that an institution receiving federal funding cannot discriminate (either intentionally or effectively) in any of its activities. Because of this act, Sonn says a similar suit brought against Delta today could not be dismissed for the same reasons.

–P.Q.

Sidebar: Opportunity Comes to Roanoke Electric

What may be the only majority-black electric cooperative board in the nation resulted, in large part, from a consistently active majority-black membership.

Of the nine board of directors of Roanoke Electric Cooperative in Rich Square, North Carolina, five are African-American and four are white–proportion which roughly corresponds to the ratio of black to white co-op members (about 53 percent to 47 percent).

The black members–hundreds of who regularly turn out at annual meetings–first won representation in 1970, when two white incumbent board members died. The remaining board members tried to nominate another two white men at the 1970 annual meeting, but the black membership refused.

“They broke up the meeting, they wouldn’t let them have it,” remembers Matthew Grant, one of the two candidates elected in 1970 and now president of the co-op’s board. “So the directors felt like they had to put some blacks on the board. One of the areas that had been pushing had a black man that they wanted to put on. The put him on, and they also put me on.”

The board then proceeded to dilute the votes of its two new black members, charges Grant, by changing the bylaws to expand the number of board seats to eleven–a change which was overturned several years later.

In 1981, for the first time, a white incumbent board member was defeated in a democratic election by a black challenger. The black members, who as usual constituted the majority of members present a the meeting, nominated their own candidate form the floor and successfully elected him into office, bringing the number of black board members up to three. The next two black candidates elected to the board were not nominated by the customer-members from the floor but were appointed by the board.

According to Grant, a struggle among the board members occurred over the appointment of the fifth black member to the board. The white board members “really didn’t want us to have a majority, and they have fought it,” Grant says. “But we go tone of the white fellas to vote with us, so we were successful.”

Since the board became majority-black, Grant says he and fellow board members have finally been able to pursue an aggressive equal employment opportunity agenda. Before a majority was won, blacks were hired only for lower-level, manual labor positions, Grant says, but now the board has made sure that blacks are hired for administrative position.

Currently, forty percent of the co-op’s sixty-two employees are black, and an independent watchdog committee has been set up to monitor future hiring.

Deregulation: “Wheeling” Over Rural Customers

Preston Quesenberry

Vol. 18, No. 3-4, 1996 pp. 24-26

The proposed deregulation of electric utilities is emerging as yet another obstacle to rural electric cooperatives becoming a progressive force in their communities. Currently, electric co-ops at least have the potential to address a wide variety of social needs in their service areas: economic development, democratic involvement, environmental protection, energy conservation, and affordable service for all customers (including low-income or hard-to-serve customers). But in the competitive, laissez faire environment created by deregulation, this host of concerns could very likely fall victim to the sole priority of generating power at the cheapest cost for what commercial utilities consider their most attractive customers–large industrial users and high-density service areas. Even worse, deregulation could threaten the very existence of cooperatives by re-moving all barriers to multi-state mergers and corporate takeovers in the utility industry.

At the core of the policy debate over the deregulation of electric utilities is the concept of “retail wheeling.” In a retail wheeling system, electric customers would no longer be required to buy power from their local utilities. Rather, the customer could buy electricity from a host of competing suppliers who would be given the right to “wheel” their power across the transmission lines of local utilities.

The large industries that are spearheading an aggressive campaign on the federal and state levels to secure retail wheeling rights claim the ability to shop around for the lowest electricity rates will save their businesses billions of dollars. But those lobbying against retail wheeling–citizens’ and consumers groups, environmental organizations, electric industry labor unions, and the trade associations for cooperative, municipal, and investor-owned utilities–think big business’s savings will be made at the public’s expense.

“Industries want to be divorced from what they see as weird social programs that have been tacked onto the electric bill,” explains Greg Wortham, counsel for the co-ops’ trade and lobbying organization, the National Rural Electric Cooperative Association (NRECA). “These include renewable–solar or geothermal–energy use, programs to make sure that the elderly or poor who can’t pay their bills still can get some electricity to live, taxes to pay for the new trees that have to replace those knocked down for electric lines, taxes relating to staving off green-house effects, and others. Industries don’t want to pay for these things. They want to be able to buy power at or near the cost of generation from independent power producers who have no local obligations or ties to local communities. But the states and their citizens have made certain decisions that these programs are important, and the cost of them is either going to have to be thrown somewhere else or simply done away with.”

Costs of a “Free Market”

Nor do industries want to share in the costs of providing power to residents in remote or low-density population areas, Wortham argues. Although the large industrial proponents of retail wheeling champion competition and the free market as bringing benefits to all, Wortham contends that the free market’s benefits will be distributed unevenly–to the marked disadvantage of rural populations. That’s why the co-ops were started, he explains.

“By 1935, the free market had given us these huge monopolies that chose not to give any electricity to ninety percent of the farms in the country,” Wortham says. “That’s when Congress decided they had to enact the Rural Electrification Act to make up for that market failure.”

The basic premise of the co-ops established under REA, Wortham says, was and continues to be for “all of the consumers in the co-op area to pool their resources so it becomes not unduly burdensome on any one customer to be served, so that everyone can be served.” Wortham worries, however, that this cooperative model might not continue to work in a retail wheeling environment.

A co-op territory depends on “everybody pitching in,” he says, and if the “most attractive loads–those that use the most power and pay their bills the best–can be picked up by other suppliers and taken out, then only the worst customers are left.” According to Wortham, this “cherry picking” results in a situation where it “becomes cheaper and cheaper for the most attractive customers and more and more expensive for the `worst’ customers.”

“It’s a vicious spiral,” Wortham continues, “The co-op left serving the worst customers gets more and more uncompetitive, and it and its community become less and

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attractive to other business or residential development. Even if a factory can move to a rural area and get its power from another supplier, its workers are still going to have to live in an area with the highest electric rates.”

Wortham points out that deregulation has resulted in similarly uneven service in other industries. Airline deregulation, for example, has resulted in low airfares to high traffic destinations and much higher fares or even the complete loss of service to lower traffic destinations.

In addition to avoiding the costs of guaranteeing power to residents in remote areas, industries also want to avoid the “stranded costs” of utilities–primarily the nuclear and coal plants which utilities invested in during the 1970s that produce power at above market rates. The U.S. electric industry has about $135 billion in outstanding bills on these investments, which consumer groups fear will be passed on to the remaining residential customers once the big industries get power elsewhere. Indeed, Texas Perspectives, Inc., an Austin, Texas, economic analysis and public policy consulting firm has conducted a study of the potential economic impacts of retail wheeling in Louisiana which projects just how much of these stranded costs could be passed on to residents. According to their report, retail wheeling would lead to a 52 percent increase in the price of power for Louisiana residents and small businesses between 1996 and 2007, while large commercial rates and industrial rates would decrease 1.6 and 3.7 percent, respectively, over the same time period.

Monopoly Games

Another concern the NRECA and others have about deregulation is that it will intensify the mergers and takeovers already being proposed in the electric industry throughout most parts of the country (although the expected buyouts have not been as prevalent in the Southern states thus far). Deregulation would entail repealing key sections of the Public Utility Holding Company Act

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(PUHCA) of 1935. which limited the ability of multi-state firms to buy or sell energy businesses and split up the massive conglomerates that controlled most of the nation’s generation and transmission at the time. The repeal of the barriers imposed by the PUHCA combined with the more competitive environment of retail wheeling will doubtless lead to more utilities merging with one another. In addition, electric utilities unregulated by the statutes of PUHCA will be more attractive acquisitions for corporate conglomerates outside the electric industry.

The current system set up by the PUHCA–in which privately-owned utilities regulated by state utility commissions have a government-sanctioned monopoly to generate, transport, and sell electricity in a limited area–was already changed significantly by the 1992 Energy Policy Act (EPAct). The EPAct allowed for wheeling on the wholesale level. Wholesale wheeling means that distribution or retail companies (that is, traditional utilities) are authorized to buy directly from competing generators but still have a local franchise over retail customers. Wholesale wheeling has encouraged the growth of the independent power producers (producers free of any obligations to serve any particular community) which are now so vigorously lobbying for retail wheeling.

Although it authorized wholesale wheeling, the EPAct specifically banned the Federal Energy Regulatory Commission from ordering retail wheeling. However, California, Illinois, Massachusetts, and New Hampshire are all in the process of changing state laws to allow for retail wheeling, even though it’s not entirely certain they have the authority to do so. Other states such as North Carolina, Florida, Maryland, and New Mexico have looked into retail wheeling and decided it is not in the state’s best interest.

However, U.S. Rep. Dan Schaefer (R-Col.), chair of the Energy and Power Subcommittee of the House Commerce Committee, introduced a bill in July which would order all states to open their electricity market to retail competition by December of the year 2000. For now, NRECA counsel Wortham predicts the bill will not get one subcommittee vote. Schaefer himself has admitted his legislation is not likely to be enacted this year, but anticipates that it will be a top priority in 1997.

Undemocratic at Heart: Transforming the South’s Utility Coops

Steve Suitts

Vol. 18, No. 3-4, 1996 pp. 27-29

The enduring, pivotal significance of the utility co-op movement is demonstrated by the simple, historical fact that never has there been another economic institution that has so many resources, that has so vital a role to play in the rural South’s livelihood, and that is within the reach of democratic transformation. Utility co-ops offer a rare opportunity in America’s private sector to unite democracy and development for the long-term direct benefit of the poor on a broad societal scale. At the moment, this effort has even more immediate significance, as the Congress has restructured vastly the terms by which the government assists the poor. The rural South is where the impact of the new welfare system will come home first for the simple reason that it is where jobs are scarcest. Amid welfare “reform” and all of the dangers and potential cruelties it includes, the utility co-op movement is a way in which to respond by attempting to link the needs of the poor with opportunities for economic development — for the creation of jobs and job skills.

The rural South is also where the majority of rural poor African Americans live, as well as the ancestral home of a majority of African Americans. There is no place more important to the rural poor, but especially the rural black poor, than the rural South. Not incidentally, it is where the greatest disrespect for the democratic principles of the utility co-op movement has been evident.

Telephone and electric co-ops, which are meant to be run by the people they serve, provide the basic utility services for much of the rural South. As we watch government support for the poor diminish over the next few years, nothing will come home faster than whether people can afford to pay their utilities, to keep their homes heated in winter, and to keep from suffering enormously in the summer heat of the South. These largely unregulated utility co-ops will make the decisions about what rates the poor pay.

Banks and utility co-ops employ more people than any other employer in the rural South, and are also where jobs are to be had in the future. Some of these jobs require high skills, some require low skills. What utility co-ops could provide the poor, if they were equal opportunity employers and truly were governed by their members, is an opportunity for jobs and job creation. These institutions are vital in determining whether or not there is either homegrown or imported economic development. They supply the essential power for manufacturing and for technological development in rural areas. Unless these utility co-ops want economic development, want their local citizens to have jobs, they can play a very obstructionist role.

We also need to remember the federal government has provided utility co-ops, in recent years, with $30 million to $35 million in no-interest loans and grants to develop services to the poor. What those services are, whether they are important to local residents, whether they help to create jobs and by what means, are all now being decided by scattered handfuls of old white men — the co-op boards of directors — who believe that no one else in a democratic institution should control those decisions.

These are all reasons why, in the short term, utility co-ops are going to be influential. They are either going to help address some of the ongoing problems of the rural South, or they are going to exacerbate those problems, or they are going to stand on the sidelines and see those problems neglectfully enlarged.

The long term potential of utility co-ops is equally important. Co-ops in the South have around $14 billion in total assets. Put together, these co-ops constitute the

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assets of a major Fortune 500 company, assets that would be essentially available, by democratic process, to ad-dress the efforts of economic and social development of the rural South. Neither federal or state government, nor other private entities are going to invest that kind of money to build new initiatives. These co-op assets, consisting of trucks, machinery, phone lines, electrical lines, buildings, equipment, and all the things that create a capacity for the utilities to serve customers, form one of the few infrastructures of the rural South. It is the infra-structure upon which an entire new growth area of American productivity in information and technology is going to be built.

Some of the disadvantages of distance from what have historically been the centers of commerce — the cities — can be overcome by the use of technology. But this will not happen in a rural area served by a co-op unless those co-ops are democratically controlled, are truly concerned about, and run by, the people they serve. The potential for using this infrastructure to build rural life with all the advantages it provides, and with some of the jobs and industries of information and new technologies — all of that potential rests on whether or not the utility co-ops are in fact, democratic and run for the development of their own members.

In an age where multinational corporations have no clear self-interest in the places where they are located, utilities and co-ops have a long-term self-interest in the people they serve. Utilities are landlocked; they can’t string a line to Thailand or Indonesia. And ultimately, their welfare should depend on the welfare of the people they serve. The potential for building a future in which poverty is not the expected way of life for the rural South is not wholly decided by what will happen to the utility co-ops. But it is hard to imagine, in this day and age, with public policy and private initiative as they are, that poverty will ever diminish substantially in the rural South, until its major, primary economic institution — the utility co-ops — become democratically controlled and finally begin to serve the people who should be governing the institutions.

Utility co-ops have been undemocratic since their beginnings and have created a unique arrangement, in law and in practice. that allows them to perpetuate the elitist control of those who have little goodwill and a lot of self-interest in their continued antidemocratic operations. Efforts have been tried and most have failed. So what do we do?

There are no quick solutions. But what must happen is taken from the lessons of political participation in the South over the last several decades. The co-ops have generally adopted an approach of soliciting token repre-

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sentation from poor communities, and in some places, from poor white communities. The local elites have perpetuated themselves in office without holding elections, or by holding bogus elections. They have handpicked people from black communities or poor white communities to serve on the co-op boards in very small token numbers. This has at times given the appearance that they are willing to have all people that they serve represented. It’s a pattern that is well-worn and as transparent as the old efforts to allow a few blacks to register in a county to blunt any criticism that blacks had no right to vote; or to handpick a few people to serve as a small minority of a board in order to blunt criticisms that a community had no representation.

Under the circumstances, what needs to happen is what happened in the development of political participation in government. The Department of Agriculture has created a “Governance Committee” that has virtually no guidelines by which to measure what co-ops are now doing. Yet it is a committee that has promised utility customers that it’s going to insure that governance is fair. It is time for community groups and local leaders who are committed to fulfilling the promise of the co-ops to see what can be done in bringing about democratic control in full view of the Department of Agriculture’s Governance Committee. In a way we’re at a stage which is not unlike the late 1950s; that was when the federal government created the U.S. Civil Rights Commission with virtually no power to do anything about the denial of black folks’ right to vote in the South — who simply were sent out with a general mandate to see what was going on.

Activists have to treat the new Governance Commit-tee as activists treated the Civil Rights Commission in the late 1950s: as if it is a body of officials who, if they see wrong, will recognize it even if they’re powerless to correct it. The case must now be made, once again, that simple democratic principles are not being observed in an institution where such principles should be required. And if those efforts to bring democracy begin to fail, as surely we must expect they will, than that has to be presented to the Governance Committee, just as the details of countless incidences of the denial of the right to vote were presented to the Civil Rights Commission in the 1950s. The work of activists helped build the case for a Commission and for regulations that had some power to make change.

The difficulty of this strategy is that this is a long-term process and there are very substantial short-term needs. To bridge that gap in time, between what is needed and how long it usually takes to get something changed, there simply has to be a greater awareness of urgency among those who are concerned about the rural South. This is a major political issue that cannot be secondary to the everyday machinations of Washington. There are people of goodwill in the Clinton Administration who should be outraged by what has happened and continues to happen. I think the activists of the rural South must now create circumstances where that outrage is seen and where old friends are called upon to act upon it.

The other difficulty here is that the era of the 1950s has passed and it is hard to recreate the kind of activism that people were engaged in at that time. When all it takes now is for enough folks to go to the polls in order to win political office in the Black Belt, it is difficult both for ordinary citizens and black leaders in those areas to think that they should return to tactics from a time when they had to stay outside the privileged circle and show some-one they couldn’t get inside, although the rules of democracy say that they should. In other words, the co-ops have sustained what is essentially a form of segregation.

It seems such an anachronism that to dismantle the anti-democratic nature of the co-ops, people have to re-turn to techniques that were used to fight segregation in the 1950s. That is an approach to problem-solving that we find very difficult to imagine and to initiate today. Yet. I see no other way to make the case than for us to begin to repeat the same approaches — with different technologies and different styles, perhaps — that were used in redressing the denial of the right to vote in the rural South. The hope here is that it won’t take thirty years.

As the damage of welfare reform begins to be evident and as those who supported welfare reform on both sides of the aisle in the Congress begin to see what they’ve done, there may be a real opportunity here for them to make partial amends by doing something that is so simple and so fundamental as requiring a quasi-public institution that by its very being should be democratically controlled to begin to live up to that promise, so there can be opportunities for the development of jobs for rural Southerners living in poverty. So it may be that the tragedy of welfare reform can bring some new possibilities for changes in the co-op utilities. That’s the hope, and it maybe the best hope, and ironically, hope usually does spring from tragedy.

Steve Suitts is former executive director of the Southern Regional Council.