At Wolverine, Big Bucks Continue to Roll
As co-op appeals coal-plant denial, new questions about retirement and board pay
September 27, 2010 | By Glenn Puit
Great Lakes Bulletin News Service
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Another large retirement payout by a member-owned utility pushing to build a $1.3 billion coal-fired power plant in Rogers City is raising more questions about how the firm is spending its money.
In the past few years the utility, Wolverine Power Supply Cooperative Inc., in Cadillac, has spent more than $20 million on the proposed Rogers City coal plant, with no guarantee it will ever be built. And last year the cooperative and its sister rural electric cooperatives in the region came under scrutiny for the pricey executive compensation packages they paid to a few of its retired leaders in 2007.
Now comes word that, in 2008, the cooperative paid an additional $2.3 million in compensation to one of those leaders, former chief executive Thomas Stevenson. The figure is from a recently released federal filings publicly available at www.guidestar.org.
Great Lakes Bulletin News Service previously reported that, in 2007, Mr. Stevenson received a $533,000 retirement payment from Wolverine, the relatively small “power supply” utility serving 225,000 members via its four “distribution” co-ops in northern and north-central Lower Michigan. It also reported that other officers and board members were being paid handsomely, as well.
Wolverine, which long ago stopped granting interview requests from Great Lakes Bulletin News Service, explains its 2008 payment to Mr. Stevenson in that year's IRS 990 form as a final payout to its former executive:
“The compensation reported...for Mr. Stevenson represents a combination of salary he deferred throughout his tenure with Wolverine, including investment-related earnings, plus the net present value of 2008 and future deferred compensation payments for Mr. Stevenson upon his retirement.”
But the newly obtained documents concerning Mr. Stevenson's retirement pay also show that the men and women on the cooperative’s board of directors also received a substantial raise in that same year, 2008, and that the pay of some of its retired members rose sharply.
Co-op board of directors, who in 2007 received, on average, $29,609 in annual compensation for about 10 hours of work a week, received close to $40,000 on average in 2008 for about the same amount of work. According to the same federal filings, the board more than doubled the amounts of monies paid to individuals listed as “former” members of its board of directors. Wolverine paid more than $81,000 to several former board members in 2007, and more than twice that—roughly $197,000—in 2008.
“The numbers are high,” said Maureen Charbonneau, who unsuccessfully ran for the board of directors of one of the distribution co-ops, Cherryland Electric Cooperative, based near Traverse City. “What was surprising to me was the $2.3 million—it is just so out of line with what else is going on around us in Northern Michigan economically.”
Ms. Charbonneau said she ran for office because of her concerns about the financial and environmental wisdom of building the Rogers City coal plant and what she said was a lack of transparency concerning Wolverine’s and Cherryland’s use of members’ money for the project. She said she was not aware of the high retirement and board salary rates until Great Lakes Bulletin News Service brought them to her attention.
During those same two years, 2007 and 2008, Wolverine spent the lion’s share of what now totals more than $20 million trying to develop its coal plant. The co-op refuses to release a line-item budget tabulating those expenses, despite repeated requests and failed motions made at recent Cherryland and Presque Isle Electric & Gas Co-op member meetings.
Wolverine, in an annual report, has stated that it defers compensation for some executives and at least some of the money used to pay for its “deferred compensation” program for leadership is funded through a life insurance program.
‘Risky, Unwise Investments’
Although many Rogers City area residents strongly supported the proposed plant when it was announced in 2006, largely because of its job-creating potential, its many critics, including Ms. Charbonneau, said the plan was financially unwise, even risky.
They argued that the co-op did not need to build a new plant and pointed out that doing so would drastically increase members’ electricity rates. They also warned that the plant’s price tag could financially swamp the small company if it was unable sell enough of the new station’s power. That, they argued, was a real possibility in an era of falling energy demand and mandated efficiency increases.
In May, the state found that, in fact, Wolverine did not need the plant and refused to issue a permit. Regulators pointed out that the plant would raise electric rates of rural ratepayers by 59 percent, or more than $70 per month.
Wolverine’s current board is now appealing the permit denial in state circuit court, which will likely be another costly move.
Wanted: More Information
Ms. Charbonneau, who opposes the board's decision to appeal the permit denial, said that, controversies over the coal plant aside, she’s concerned not only about the sheer amount of the expenditures paid to executives and board members, but also the fact that the individual payments are hard to discern for co-op members.
“I think that these days, accountability and transparency are big issues for many business, but co-ops by their very nature need to be more transparent than a for-profit company,” Ms. Charbonneau said. “Is there a lack of transparency because these numbers are numbers that would really upset the membership?”
Ms. Charbonneau continues to advocate for more involvement of co-op members in the financial business of their electric cooperatives.
She said that she wants to see more individuals running for electric cooperatives’ boards to increase transparency on financial payments to executives, and to also help the cooperatives look in a different direction for energy generation.
With Wolverine spending so much money on a coal plant that may never be built—and with more than 100 other U.S. electric utilities canceling their coal plans largely due to financial risks—Ms. Charbonneau doesn’t believe most co-op board members are receiving adequate information on the true costs of the plant and the viable alternatives.
“A coal plant that would cause electric rates to double would get members' attention, but by then it will be too late,” Ms. Charbonneau said.Glenn Puit is a policy specialist for the Michigan Land Use Institute. Reach him at email@example.com. An archive of our coverage of Michigan’s coal rush, clean energy development, and the battle over Wolverine’s proposed plant is here.