Skyrocketing Rates: why some southwestern indiana residents are trying to oust their electric cooperative board of directors.

By: Sara Wittmeyer

Jimmy Shields has owned the hardware store in Linton for years, and before that it was his dad’s business. If you want to know what’s going on in town, Shield’s Hardware is a good place to start.

The buzz for the last year or so has been all about what people are paying for their electricity.

Jimmy Shields, top left, owns Shield's Hardware in Linton, Ind.
"People are complaining about it," Shields says. "They were trying to make changes to conserve electricity and that kind of brought it all to our attention. What is going on here?"

The Utilities District of Western Indiana (UDWI) serves 11 counties in the central and western part of the state, including large swaths of Greene, Monroe, Lawrence, Owen and Clay counties. That’s about 19,000 customers.

Map: Indiana Electric Cooperatives.

It’s one of 18 Rural Electric Membership Cooperatives (REMCs) that buys its power from Hoosier Energy. But residents recently realized UDWI was charging a lot more than the other co-ops to deliver that power to their homes.

Data obtained from the U.S. Energy Information Administration shows residents here pay 16.38 cents per kilowatt hour. That’s the highest of the co-ops that get their energy from Hoosier Energy, the highest in the state and among the top ten in the Midwest.

It means the average UDWI customer might see a monthly bill of about $160. Someone using the same amount of energy but served by Duke would get a bill for about $115.

What is an energy cooperative?

The organization of an electric cooperative is based on member control. Each member, or rate-payer, votes for someone to represent them on a Board of Directors. The board then hires and manages the co-op CEO, who works with the board to establish the rates. That’s different than municipal or public utilities, which have to get state approval before a rate increase.

If a member is unhappy with the direction the co-op is going, they can vote for someone else to represent their interests on the board .

“So if I’m an elected rep on that local board I’m going to want to hear from the people that elected me, to make sure I’m paying attention to issues in the community, to make sure the coop is operation at an excellent level of services," says Martin Lowery, Executive Vice President of Member and Association Relations for the National Rural Electric Cooperative Association.

For only the third time in close to 30 years, a UDWI member is challenging Board President Jim Weimer’s spot on the Board of Directors.

His opponent is Todd Carpenter, an accountant who lived in Bloomington until last year and got his power from Duke Energy.

“When I moved I immediately started figuring out the rate per kilowatt – over 25 percent more,” Carpenter says. “And then after the holidays you start talking to some of your family members and you start hearing some of the bills they are paying, and I’m kind of flabbergasted.”

Carpenter owns an accounting firm, so naturally he started doing research and running different numbers.

“The numbers, when you have them in front of you, they say you should be cutting costs,” says Carpenter.

So Carpenter gathered the 50 signatures needed to get on the ballot to challenge Weimer.

“As the board we didn’t know that we were highest in the state. I mean we know – we know that our rate is high, so that’s a known,” Weimer says. “And nobody is trying to say we didn’t know that. We knew that.”

“That’s probably my fault, I’m not going to lay that on the board,” says CEO Brian Sparks, who’s worked in that position for the last decade of his 33 years with the company.

Left: Jim Weimer, UDWI Board President. Right: Brian Sparks, UDWI CEO

Sparks says he was hearing a lot of complaints that members were suffering power outages too often, and he says to increase maintenance they had to collect more revenue.

Tax returns from the co-op show they’ve increased spending over the last several years on tree clearing and brush removal. It’s gone up from about $720,000 in 2012 to more than $2 million in 2015.

Sparks says they’ve also used the extra revenue to perform breaker maintenance and pole tests.

“We started doing all of the things that we should have been doing all of the time,” he says. “And we’ve increased our reliability 83 percent in the last five years.”

Sparks says he hasn’t heard members complain about the rates. “The ones that was coming up and talking to me, they was just appreciative that their lights was staying on during storms,” he says.

2015 tax returns show 53 percent of what UDWI customers pay go towards the actual purchase of energy.

That’s lowest of any of the REMCs under Hoosier Energy. Jackson County REMC, the energy co-op that borders UDWI on to the east, uses almost 15 percent more of what it charges customers to purchase energy.

Graphic: Infogram

Sparks says the remaining 47 percent goes toward making improvements and keeping the cooperative running.

“I think our margin is like 7 percent,” he says. “We work to have enough money to do stuff. And then whatever margin we have at the end of the year…we eventually will give that back to the customer.”

The co-ops are not for-profits, so according to the group’s own bylaws, revenue over the cost of expenses is supposed to be returned to the ratepayers.

The co-op formed in 1937, but the refunds are something the co-op just started doing within the last five years. They’ve paid years 1937-1960, roughly $1.3 million, and will return 1961 this year.

Sparks says even though some of those customers from close to 60 years ago may be dead, their heirs can collect the refund checks.

The group's 2015 tax return shows that out of over $49 million in revenues for the year, it has allocated $5.6 million of excess earnings for return to its members. Sparks says that it will all eventually be paid back to the members.

“It might be 20 years down the road though,” he says.

Over the last five years, tax records show that more than $15 million of excess earnings have been reported. When asked how these funds are kept to eventually return to ratepayers, Sparks declined to provide any details.

Carpenter says if he wins a spot on the board, one of the first things he’ll do is to increase transparency: open up the books to show people where the money is going and find ways to curb spending.

He’d start with his own board member compensation. Tax returns show the UDWI board is among the highest paid under Hoosier Energy. In 2015, Jim Weimer received just shy of $33,000 for an estimated 14 hours of work per week.

Graphics: Infogram

The board sets its own salary based on what Weimer says is going on around the state and what is reasonable. Each UDWI board member also receives a benefits package, which increases the compensation.

Weimer says he thinks the board compensation is fair.

If you’ve picked up the local paper recently, maybe you noticed this headline: Tightening the Belt.

It’s an advertisement for the co-op, published soon after a July 2016 study from the Indiana Electric Cooperatives identified UDWI as the highest electric rate in the state .

Sparks says he didn’t know UDWI’s rate was the highest in Indiana until this report, and he and the board started looking for ways to reduce customers’ bills right away.

Advertisement published in the (Bloomington) Herald Times.

The ad says members will see a 4.1 percent decrease in their energy bills in 2017, accomplished by “reviewing board compensation rates,” delaying a building project and reducing purchases of equipment.

But most of the savings UDWI is reporting came from cutting what’s called the variable tracker rate.

The tracker is used to cover unforeseen expenses that aren’t common enough to be included in the fixed rate you pay for energy, like a tornado or a really hot July with a couple weeks of triple digit temperatures.

The tracker charge usually fluctuates each month, but Sparks says he’s guaranteeing customers it’ll be zeroed out this year, resulting in an annual savings of $1.38 million.

On a $300 bill, the tracker charge would typically be less than $2.

“This year we are going to just eat whatever [the fixed rate] doesn’t cover,” Sparks says. “Which will in turn reduce the rates even more because…we don’t have to pass that on to our members.”

The tracker rate is separate on your bill from the fixed rate – that rate is the most significant one, and it’s staying the same.

Sparks says these savings mean the UDWI co-op no longer has the highest rate in the state, but we have not been able to confirm that.

"We aren't proud of the fact that we have the highest rate in the state," Weimer says. "[Members] appreciate where they live, but it is an area that is expensive to provide electricity to and we share the cost of that across the co-op."
A billboard almost across the highway from the UDWI office in Bloomfield asks ratepayers to vote next month, and vote for change.

All three open board seats in the Utilities District of Western Indiana are contested, and every ratepayer is allowed to vote.

NRECA's Martin Lowery says this election process is what makes electric cooperatives so unique. “[It's] maybe the best example of democratic institutions in the U.S.," he says. "Because it’s one member one vote, open for anybody to attend meetings, and very much, as we hope around the country, open and transparent to the members.”

However, a national study shows 70 percent of energy co-ops in the U.S. have a voter turnout of less than 10 percent.

UDWI members can vote at the annual meeting on April 8 at the White River Valley High School. Votes must be cast in person between 10:30 a.m. and 1 p.m.

Note: At least one WFIU/WTIU Radio and TV Services employee is a UDWI customer, but that person is not a newsroom employee and is not involved in any news reporting.

Assistance with this report: Louis John Murray (data analysis), Ryan DeBattista (graphic design), Steve Burns & James Vavrek (videography), Cathy Knapp (research) Becca Costello (web design).

Created By
Sara Wittmeyer

Made with Adobe Slate

Make your words and images move.

Get Slate

Report Abuse

If you feel that this video content violates the Adobe Terms of Use, you may report this content by filling out this quick form.

To report a Copyright Violation, please follow Section 17 in the Terms of Use.