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

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.