The cautionary tale of an electric cooperative struggling with a sell-out threat was a staple of co-op reportage for decades. “The Sugar Valley Story” occupied several pages of the January 1972 issue of RE Magazine.
A few months earlier, Sugar Valley Electric Cooperative Association’s membership had voted “no” to selling the distribution system to Kansas City Power & Light Company (KCP&L). But then six weeks later, a much smaller majority voted to keep in office the board of directors that had unanimously recommended the co-op accept the investor-owned utility’s purchase offer.
“And so, as 1972 begins,” the italicized introduction to the story read, “the future of the 1,339-member cooperative remains cloudy.”
Sugar Valley Electric was organized in 1940 in Mound City, Kansas, a small town in hilly farm country 60 miles south of Kansas City/Overland Park. It took 21 long years for the co-op to get into the black, but then it began to prosper. KCP&L, which served in town and was the co-op’s power supplier, took notice.
In 1967, some members of the co-op’s board of directors met informally with KCP&L officials about future prospects. The board was reluctant to discuss what was said at this and subsequent meetings, but when the IOU and a partner, Kansas Gas & Electric Company, built a power plant in the co-op’s service territory, people who had heard about the meetings began to worry about their co-op’s future.
Then, on Oct. 8, 1971, board president W. Lee Smith sent a notice to all co-op members inviting them to a special meeting Oct. 25 to decide whether to sell out to KCP&L. A follow-up notice Oct. 20 made it clear the board was unanimously behind the idea.
The board pointed to three burdens that would be lifted by the sale: the co-op’s difficulty borrowing enough money from the Rural Electrification Administration for capital improvements, the challenges of providing service to a large new housing development, and planning ahead to serve a new consolidated school.
KCP&L would pay off the co-op’s debt to REA, pay each member $100 for his or her $5 membership certificate, and write each of them a check for accrued capital credits, the board explained.
RE Magazine learned that KCP&L would also provide financial favors to the co-op’s manager, his staff, and each board member. The article mentioned retirement and insurance benefits and a “rumored” consultant job for the manager at the power plant.
None of this was surprising to Charles Ross, manager of Kansas Electric Cooperatives (statewide) in Topeka, or the six anti-sale farmers in Sugar Valley who formed the Concerned Citizens Committee. The tip-off for Ross was the board’s decision in early September to drop out of the statewide association.
The committee produced an impressive list of reasons why the sale was a bad idea:
- The board had agreed on a sale price without seeking the advice of an outside appraiser.
- The price was $250,000 less than an appraisal by the Kansas Property Valuation Division.
- More than once, the co-op’s attorney had represented an investor-owned utility against a co-op.
- The co-op was not in any financial distress. It had shown a healthy net margin of $38,829 in 1970.
- Accrued capital credits, another indicator of financial strength, had doubled between 1967 and 1969, from $14,790 to $28,818.
- Other Kansas co-ops stood ready to lend Sugar Valley Electric $175,000 should it begin to struggle financially.
- Two neighboring systems were willing to consider a two-way or three-way merger.
At the Oct. 25 meeting, 542 members voted: 159 for selling out; 383 against.
Six weeks later, with only 200 members present, 125 voted to retain the existing board, and 75 voted for a new slate.
Sugar Valley Electric Cooperative Association held on for a few more years before merging with Cooperative Electric Power and Light Company of Iola, Kansas, to become United Electric Cooperative. Then, in 1997, Sekan Electric Cooperative Association, one of Sugar Valley Electric’s original neighbors, was folded into United Electric and a new name,
Heartland Rural Electric Cooperative, was chosen.