In a victory for Louisiana’s electric cooperatives, a district court judge ruled this month that the state regulatory commission exceeded its authority by trying to dictate how co-ops should govern themselves.
Louisiana Public Service Commission, which regulates electric cooperative rates, issued an order last spring that, among other things, imposed an 18-year term limit on co-op directors, limited a co-op’s ability to require a quorum of members to be present for board elections, and mandated that elections be conducted by mail-in ballot or a machine-cast ballot at a central location. The commission also directed that election results be certified by an accounting firm chosen by commissioners, required disclosure of director compensation, and declared that co-op directors who receive health insurance must get the same insurance as co-op employees.
After the order was issued, seven co-ops in the state filed a lawsuit, arguing the commission had overstepped its powers under the state constitution by going beyond its authority to approve or reject rate increases and services. The regulators issued their order after commissioners questioned the salaries and benefits of co-op directors.
Co-ops were reluctant to sue the regulators but felt they had to protect the rights of their consumer-members, who vote on the bylaws that govern board elections and compensation, said Randy Pierce, CEO and general manager of
Dixie Electric Membership Corp. in Baton Rouge.
“As a manager, the commission put me in a position of having to decide whether to adhere to the co-op bylaws created by our members or to the commission’s order,” Pierce said. “We had to sue to clarify how far into the boardroom the commission is allowed to reach. Otherwise, what’s next? Would they start telling us who to hire?”
On Feb. 10,
Judge Richard “Chip” Moore III of the 19th Judicial District Court Parish of East Baton Rouge declared the commission’s order to be invalid, “finding that the Commission lacks both constitutional and statutory authority by which it can regulate corporate governance and board structure of the Electric Cooperatives.”
“The express language of the 1974 Louisiana Constitution reasonably interpreted does not allow the Commission the authority to dictate how a private company conducts its own business,” the judge wrote in his ruling.
The commission has until April to decide whether to appeal Moore’s decision.
Jeff Arnold, CEO of the
Association of Louisiana Electric Cooperatives and an NRECA director, said the association was gratified by the judge’s ruling.
“The PSC was going outside of its authority to regulate rates and services and setting a precedent that we couldn’t allow to happen,” Arnold said. “We had to fight this, and the judge agreed that the commission went too far by stepping into our boardrooms.”