WINCHESTER — Rappahannock Electric Cooperative customers are paying above wholesale market rates for electricity, according to an energy research firm hired by a group of dissatisfied REC members.

Earlier this month, the Institute for Energy Economics and Financial Analysis (IEEFA), a nonprofit research firm based in Cleveland, released a study that says because of a long-term contract the REC board entered into in 2009, REC members have been paying 1.5 to 2.5 cents per kilowatt hour above the wholesale market rate for electricity.

In 2017, REC members paid about 6.3 cents per kilowatt hour when the market rate was about 5 cents, IEEFA analyst Cathy Kunkle said in an interview. “The co-op appears to be paying above market rates for electricity.”

The contract in question is a 45-year agreement between REC and Old Dominion Electric Cooperative (ODEC). It stipulates REC will buy 95 percent of its wholesale power from ODEC through 2054.

REC is one of the largest retail electric co-ops in Virginia, providing electric service to 22 counties and 11 towns. The co-op serves 27,487 members in Frederick and Clarke counties, REC spokesman Matt Faulconer said on Monday. ODEC is a federally regulated organization that supplies electricity generation and transmission to 11 member co-ops in the Mid-Atlantic.

Kunkle said the study was conducted at the request of a group of REC customers who call themselves “Repower REC.” The study’s findings are based on rates paid by REC customers from 2015 to 2017 gathered from the federal Rural Utility Service. Some of the data was obtained through Freedom of Information Act requests. The actual REC/ODEC contract has not been released by the REC board.

According to Kunkle, when the contract was signed in 2009, REC was paying less for electricity from ODEC than what would have been available on the wholesale market via the PJM grid, which serves the Mid-Atlantic.

But the price of electricity has fallen since 2009 because of the increased use of power sources such as wind, solar and natural gas, Kunkle said. REC members could benefit from the lower prices, but the contract keeps REC ratepayers “locked in” to a higher rate and will continue to do so “for the foreseeable future,” as gas and renewable energy sources are projected to keep driving down the price of electricity.

In a statement emailed to The Star, Faulconer says the IEEFA study is an “oversimplified view” that doesn’t realize the contract’s purpose. “Consumers should understand that power supply is a marathon, not a sprint, and any accurate evaluation needs to be viewed over the long-term.

“A ‘snap-shot’ of the market compared to a long-term contract is not an ‘apples-to-apples’ comparison; it’s like saying the interest rate of a variable rate mortgage is lower than the rate of a fixed mortgage — it might be true today, but are you willing to take that risk over the 30-year term of the mortgage?” Faulconer wrote in the statement. ”Anyone buying on the hourly spot market would be fully exposed to the volatility of the market, such as price spikes that occurred during the Polar Vortex of 2015.”

Faulconer said REC’s large industrial members are able to buy energy from the wholesale market, but in 10 years “only one company has chosen the market over REC.”

About 6 percent of ODEC’s energy portfolio comes from renewable sources, Faulconer said in the statement. ODEC also opened a new natural gas generation facility in Maryland this year.

Seth Heald, a 65-year-old REC member from Culpeper County, is a founder of Repower REC. He said he has routinely been denied a copy of the REC/ODEC contract and believes the REC board operates without sufficient “financial transparency.” He said he reads REC’s informational magazine and all the co-op letters sent to him, but he was not informed of the contract before it was signed.

“We feel there’s a problem with an entrenched board,” Heald said. REC board meetings are not open to members. “REC has been silent about this contract... we need answers.”

The REC board has nine members, each of whom serve three-year terms and are paid a $2,000 a month “retainer,” Faulconer said, as well as a $500 per diem when they are on official co-op business. The board chairman and vice chairman are both residents of the northern Shenandoah Valley.

REC board vice chairman and Frederick County resident Michael W. Lindsay, who has been on the board since 2010, declined to answer questions on Monday, instead referring inquiries to Faulconer. Chairman Christopher G. Shipe, of Clarke County, did not respond to calls seeking comment on Monday.

Repower REC organizes through email and through the Repower REC Facebook page, which as of Monday had 173 followers. The group also manages the website repowerrec.com.

Heald said the group is seeking amendments to the REC bylaws to allow members to attend board meetings, force the co-op to self-publish comprehensive board member pay each year and loosen the board’s control over co-op elections, particularly as it relates to proxy votes.

Faulconer said in an interview on Monday that opening board meetings to members would “constrain” the board’s ability to “efficiently” conduct business. “We are very confident the elections are fair.”

REC does not publish board member pay, Faulconer said, but those figures are reported to the IRS, which in turn makes them available to the public on various websites.

Repower REC is appealing the desired bylaw changes to the State Corporation Commission in Richmond. A hearing is scheduled for Dec. 11.

— Contact Onofrio Castiglia at ocastiglia@winchesterstar.com

(1) comment

When they force more people to PAY SOMETHING...thats righteous.

Recent report out of Mexico City...50% of the power consumers...PAY NOTHING. Yeh, how noble

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