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Seth Heald campaigns for transparency, democracy

When the Rappahannock Electric Cooperative (REC) Board of Directors launched a campaign to increase its fixed charges for members in 2017, Seth Heald decided it was time to intervene.

“A lot of people thought . . . it was an attempt to slow the growth of solar power,” Heald said. “And it also had the effect of hurting anybody who used less than the average amount of power.” 

Heald co-founded Repower REC in 2018 as a “grassroots coalition of concerned REC member-owners working with Solar United Neighbors of Virginia” to advocate for transparency, democracy and consumer focus within the cooperative. Now, Heald is running for a seat on the board as a candidate in Region IV, which includes Culpeper and Orange counties.

In his years as a consumer advocate, Heald has obtained and published REC’s tax returns and openly criticized the board for paying themselves a stipend of $2,000 per month, a figure he believes is too generous. If elected, Heald has pledged to accept only 75 percent of the monthly stipend.

One of Heald’s top priorities is to reform the way REC member-owners vote for their representatives on the board. 

“Cooperatives have seven principles, and one of the most important ones is democratic control,” Heald said. “So then the question becomes, how democratic is it really? If you understand the subtle ways that they rig the election system, they’re really trying to have it not be too democratic. I’ve been criticizing them on that for a while.”

As it stands, voters must cast their ballots in person at the annual board meeting or designate a proxy to vote on their behalf. But that system, Heald says, is easily manipulated by the incumbents — some of whom have used it to secure their positions on the board for more than 35 years. 

It works like this: when member-owners go into the REC office for services, sometimes they will sign away their vote without even realizing it. 

“[An] employee in the office hands them a proxy form and says, ‘Here, I need you to sign this and return it to me. You can’t take it with you, I need you to sign it right now,’” Heald explained. The REC also offers incentives for signing the forms, like grocery cards and cash prizes worth up to $250.

These forms, called ‘blank proxies’ because they are signed but impartially filled out, essentially allow board members to reelect themselves by filling in the blank. 

“If the system allows the board to choose how the blank proxies will be voted, and if the blank proxies make up half or more of the total votes, that means for a challenger to win you not only have to get more votes than the incumbent, you have to get another 3,000 to 4,000 more votes,” Heald said.

The blank proxy loophole is just one of several policies Heald hopes to update. People don’t know about this loophole, he said, because most of the board’s meetings happen behind closed doors. “If there’s a little transparency, then at least the consumers as voters in a democracy might apply a little pressure and the board members might feel a little pressure to be responsive,” he said.

Electric cooperatives played a major role in rural electrification during the 1930s. Privately held companies, which supplied electricity to cities, found it unprofitable to power rural areas where homes were farther apart. “And so Roosevelt and Congress at the time recognized that a cooperative form of business ownership would be one way of having rural people get together and take it into their own hands,” Heald said. 

In a cooperative, power users are called “member-owners” because they themselves are the shareholders of the company. Member-owners may not know it, but they pay into their co-op a little more than just the cost of doing business, and the excess money collected at the end of the year is called a margin. 

“Because it’s a non-profit, they’re not allowed to just take [the margin] and keep it for themselves, so what [REC does] is they allocate it on their books to every member in proportion to that member’s power consumption during the year,” Heald said. “And that’s where there’s a huge lack of transparency.”   

Generally speaking, electric cooperatives hold onto their member-owners’ money for between 20-40 years and then pay it back, much like a dividend. But according to Heald’s research, REC has retained some $400 million in capital credits belonging to member owners, about $2 million of which is considered “retired” and owed to an estimated 21,000 people that the REC can’t find anymore.

“Most people . . . don’t really understand they’re in a coop and that they have that money,” he said. 

“The other real thing is if [co-ops] really don’t give [the money] back at all, then they start to get into a territory where they’re not even a cooperative and they’re not even a non-profit,” Heald continued. “And they get tax benefits under federal law for being a cooperative . . . so if the IRS or some federal law enforcement agency were to investigate and find they were not doing that, there could be consequences. But there’s really very little enforcement on both those laws. There’s very little oversight.”

Heald believes the key to improving the REC is to make the cooperative more transparent on all fronts. He is pushing for open meetings, better access to board members, more financial disclosure, and better communication with member-owners so they know what they are entitled to and what power they have. 

“Since a cooperative is owned by the customers, they should have access to that basic kind of information so they can monitor how the co-op is doing,” he said. 

Voting is open through August 12 and can be accomplished online, by mail or remotely on August 19. To find out more about voting and registration, visit https://www.myrec.coop/share/member-benefits/annual-meeting-register.cfm

Correction: a previous version of this story mistakenly reported that $400 million is owed to 21,000 member-owners. However, $400 million is the total amount in capital credits that the REC currently holds as a business. The amount that is owed to its 21,000 “lost” member owners hovers around $2 million. The story above has been corrected.


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