An Oregon congressman is urging lawmakers to pass a bill that would allow rural electric co-ops to receive government grants for disaster relief and broadband internet service, without losing tax-exempt status.
In a letter sent May 30 to members of the House Ways and Means and Senate Finance committees, U.S. Rep. Grag Walden, R-Ore., expressed his support for the Revitalizing Underdeveloped Rural Areas and Lands — or RURAL — Act of 2019.
The bill aims to fix what the National Rural Electric Cooperative Association described as an unintended consequence of the sweeping GOP tax reforms in 2017.
To be considered tax-exempt, rural electric co-ops — many of which serve farm and ranch communities — cannot receive more than 15% of income from non-member sources. However, the current tax law contains a provision that counts federal, state and local grants as income rather than capital.
That means if a utility applies for money from the Federal Emergency Management Agency to restore power following a natural disaster, it might exceed the threshold for tax exemption and result in higher rates for consumers.
The RURAL Act calls for changing the code, allowing co-ops to receive emergency aid and funding for rural broadband without counting toward income.
Walden, a Republican whose district covers nearly all of Central and Eastern Oregon, is co-sponsoring the legislation.
"Rural electric cooperatives and other consumer-owned utilities are at the center of efforts to grow Oregon's communities and rebuilding when disaster strikes," Walden wrote. "The utilities and their members should not be penalized with long-term tax costs for keeping the lights and keeping power affordable for rural Oregonians."
Keith Brooks, general manager of the Douglas Electric Cooperative in Roseburg, understands the predicament all too well.
Earlier this year, a heavy winter snowstorm damaged about 105 miles of transmission lines across the co-op's service area, which covers about 2,200 square miles in western and southern Douglas County. Some of the co-op's 9,000 members were without power for up to three weeks, Brooks said.
Brooks said the storm was "beyond any other experience we've had as a company," costing the co-op an estimated $10 million.
"We worked more overtime in less than a month than we have in the last 10 years combined," he said.
Douglas Electric Cooperative recently applied for FEMA funding to cover up to 75% of the expenses. With uncertainty around the tax law, Brooks said the grant could have a considerable impact on ratepayers if it is counted toward income.
"It's just going to add to the burden that we are already carrying," Brooks said.
Across the state, the Columbia Basin Electric Cooperative in Heppner has also applied for a significant USDA grant to extend fiber internet to every home and business within the service territory.
CBEC serves roughly 2,800 customers over 3,005 square miles spanning five Central and Eastern Oregon counties, including Umatilla, Morrow, Gilliam, Wheeler and Sherman. The co-op's board of directors approved the fiber internet initiative in 2016, which is expected to cost $18 million at full build-out.
Thomas Wolff, CBEC general manager, said access to rural broadband is becoming more critical for farmers and ranchers that drive the region's economy.
"From working futures on your wheat crop to ordering parts on your combine, today's businesses run on high-speed, quality broadband," Wolff said.
Wolff said the co-op could not afford the project without government funding. Without the RURAL Act, he said CBEC ratepayers would be required to pay substantially higher power bills due to tax penalties.
"It would be an abrupt and large increase in power rates to rural consumers due to this inadvertent oversight," he said.