news June 5, 2023

Integrity Fund Helps Missouri Co-op Win Territorial Dispute

Missouri-based Co-Mo Connect Powered by Co-Mo Electric Cooperative (Co-Mo) recently won a year-long territorial dispute with an investor-owned utility (IOU). The Cooperative System Integrity Fund, managed by CFC, supported Co-Mo throughout the battle by helping with legal fees and expenses associated with putting together a case before the state commission.

“Knowing CFC was there to backstop a potentially onerous legal effort helped Co-Mo demonstrate that investor-owned utilities could not just drive up expenses to the point that the law failed because the co-op didn’t have adequate resources for a proper legal counter case,” Co-Mo CEO Aaron Bradshaw said.

The dispute began when a contractor planned to build a new 450-home subdivision just outside the city limits of Boonville, Missouri—an area in Co-Mo’s service territory that would likely be annexed by the city as the subdivision was built. The developer selected Co-Mo as the energy provider, but the Boonville IOU wanted the territory. This triggered a test of the state’s new Co-Op Service Option Law, which allows electric cooperatives to compete with IOUs by permitting property owners the opportunity to choose their electric service provider prior to annexation into the city. The law was supported by the statewide, the Association of Missouri Electric Cooperatives (AMEC).

Contractor Decided to Stay with Co-Mo

Under the Missouri law, the contractor who owned the property being developed had the option to stay with Co-Mo as the electric service provider for the new subdivision rather than having Ameren, the local IOU, become the default electric service provider.

Ameren contested the new law with the Public Service Commission, which led to a legal dispute between Co-Mo and Ameren. Ultimately, Ameren realized they were unlikely to win the case, as the law was on Co-Mo’s side, and a new territory agreement was created that both Co-Mo and Ameren approved.  

“It is hard to predict exactly how new laws will be interpreted, but this is the outcome we hoped for,” AMEC CEO Caleb Jones said. “Electric cooperatives have a long history of not only providing essential services, but also being invested in the betterment of their communities. As cities and towns annex additional land, this law will allow cooperatives to maintain their service territory and continue to serve their communities.”

Winning Dispute Defines Process for New Law, Offers Template for Co-ops

“Winning this dispute helps define the process for the new law and offers a template for other cooperatives to follow,” Bradshaw said. “It opens the door for cooperatives to provide opportunities for economic development and growth of the cooperative, which can greatly benefit member-owners.”

He continued, “It helps secure our investments in infrastructure and protects our service territory in a way that was previously unavailable to any Missouri cooperative.”

Being the first cooperative to test the new law gave Co-Mo knowledge that it can pass on to peers in the state.

“First and foremost, it is important to make sure you understand the law,” Bradshaw said. “Had Co-Mo not done its homework beforehand, it would have been very easy to miss a requirement like the establishment of a franchise agreement or one of the many required deadlines.”

He concluded, “Another lesson we would pass on to other electric cooperatives is to pick partners wisely when going into a dispute. Find a legal partner that is dedicated to a successful outcome and will help guide you through the process. If the property in question is a development, such as the subdivision in our case, make sure you have a developer and landowner who are committed to the process and are willing to stick out the potentially lengthy and, at times, uncomfortable process.”

The Integrity Fund

Since its creation in 1986, the Integrity Fund—administered by CFC with decisions made by a five-member committee composed of CFC, NRECA and Rural Electric Statewide Managers Association representatives—has awarded more than $30 million in grants to nearly 300 cooperatives in 43 states to fight takeover and annexation bids by investor-owned utilities and municipal electric systems; preserve rights to offer non-electric energy services; and resist regulatory, judicial or legislative actions that threaten the cooperative business model.