Could a South Carolina rural electric cooperative sell services beyond electricity?

Plain-English summary

In 1999, two legislators asked whether a South Carolina rural electric cooperative could offer products and services besides electricity, either itself or through a subsidiary. The Attorney General's office said the Rural Electric Cooperative Act permitted that diversification. Its answer rested on the act's broad power to own stock in other corporations or cooperatives and its incorporation of general corporate powers.

The office reaffirmed a 1985 opinion that had allowed a cooperative subsidiary to market satellite television equipment. It said the act had not been materially amended in the intervening years and found no basis to call that earlier reading clearly erroneous. It separately noted that whether tax-preferred status gave a cooperative an unfair market position would require factual findings outside the AG opinion process. This letter did not resolve that question.

Currency note

This opinion was issued in 1999. Subsequent statutory amendments, court decisions, or later AG opinions may have changed the analysis. Treat this page as historical context, not current legal advice. Verify current law before relying on any specific rule, deadline, or remedy mentioned here.

Common questions

Could a rural electric cooperative offer non-electric services? A: The AG said yes. The act allowed the cooperative, through a subsidiary or otherwise, to enter businesses offering products and services other than electric power.

Could a cooperative own a subsidiary for another business? A: Yes. The opinion relied on the act's express authority to become a member of or own stock in another cooperative or corporation, without limiting that entity's purpose.

Did the opinion decide whether tax advantages made diversification unfair? A: No. The footnote to the earlier opinion said that marketplace question required factual findings the AG office could not make in an opinion.

Why did the office reaffirm its earlier interpretation?
A: It said the act had not materially changed since 1985 and the earlier opinion was not clearly erroneous.

Background and statutory framework

The letter read §33-49-250's cooperative powers together with Section 33-3-102's general corporate powers, which the cooperative act incorporated. It compared other states' more restrictive laws but said their limiting language was absent from South Carolina's act.

Citations and references

Statutes: §33-49-250; Section 33-3-102.

Official title

Addressing whether a South Carolina rural electric cooperative (“SCREC”), either through a subsidiary or otherwise, may lawfully engage in the business of offering products and services other than electric power.

Requester

The Honorable Ronald P. Townsend, Chairman. House Education and Public Works Committee and The Honorable John C. Land, III, Senate Majority Leader

Source

• Landing page: https://www.scag.gov/opinions/opinions-archive/july-23-1999/
• Original PDF: https://www.scag.gov/wp-content/uploads/2013/11/99july23townsend.pdf

Original opinion text

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The State of South Carolina

OFFICE OF THE ATTORNEY GENERAL
CHARLES MOLONY C ONDON
ATTORNEY GENERAL

July 23, 1999

The Honorable Ronald P. Townsend
Chairman
House Education and Public Works Committee
2328 Wright School Road
Anderson, South Carolina 29621

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The Honorable John C. Land, III
Senate Majority Leader
Post Office Drawer 13 8
Manning, South Carolina 29102
Gentlemen:
You have requested an opinion from this Office addressing whether a South Carolina rural electric cooperative ("SCREC"), either through a subsidiary or otherwise, may lawfully engage in the business of offering products and services other than electric power. For the reasons set forth below, it is the opinion of this Office that the South Carolina Rural Electric Cooperative Act, §3345-10 et seq. ("SCRECA") does not prohibit such diversification. Section 33-49-250 of the SCRECA addresses the powers of a SCREC and broadly empowers SCRECs, among other specifically enumerated powers, "[t]o become a member in one or more other cooperatives or corporations or to own stock therein." Focusing on this language, this Office concluded in an opinion dated August 6, 1985, that a SCREC may become the sole shareholder and thus, the owner, of a subsidiary that markets television receiving-only satellite systems and related television equipment and supplies. 1 Commenting upon the broad latitude available to rural electric cooperatives, the 1985 opinion noted that §33-49-250 contains "no limiting language as to the

85-79 Op. S.C. Att'y Gen. 212 (1985). This Office was also asked to address whether a SCREC could use its tax-preferred, non-profit status to acquire a favorable position in the marketplace. As stated in the opinion, "[a]n inquiry of this type would require factual findings which this Office is not empowered to make in the context of issuing opinions. This Office cannot usurp the fact finding functions of the courts of the State of South Carolina ."Id. at 214. RE\IBERT

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TELEPHONE:

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The Honorable Ronald P. Townsend
The Honorable John C. Land, III
Page 2
July 23, 1999

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purpose of the other cooperatives or corporations in which stock may be owned." 85-79 Op. S.C. Att'y Gen. 213 (1985). Diversification, therefore, was permissible because the SCRECA clearly authorizes an electric cooperative to own stock in one or more other cooperatives or corporations, regardless of the purpose for which such other cooperatives or corporations are formed. The longstanding standard of review used by this Office to determine the validity of a prior opinion is whether that opinion is clearly erroneous. 84-4 Op. S.C. Att'y Gen. 22 (1984). Such a result could be reached, for example, when a legislative act in the intervening time causes the conclusion to be erroneous; however, the General Assembly has not materially amended the SCRECA since this Office rendered the opinion of August 6, 1985. Moreover, it is well recognized that the absence of any legislative amendment following the issuance of an opinion of the Attorney General strongly suggests that the views expressed therein were consistent with the legislative intent. Scheff v. Township of Maple Shade, 149 N.J. Super. 448, 374 A.2d 43 (1977). Indeed, the General Assembly has on occasion acted swiftly in amending statutes following the issuance of an opinion by this Office, but such has not occurred in this instance. Accordingly, our additional review of the SCRECA does not compel the conclusion that the interpretations reached in our earlier opinion have become clearly erroneous. Therefore, we must affirm the opinion of August 6, 1985. In addition to the specific grant of power to own stock or to become a member in other corporations or cooperatives, §33-49-250 broadly grants to SCRECs all "the powers conferred on all private corporations by §33-3-102 .... " Section 33-3-102 of the South Carolina Business Corporation Act of 1988, as amended (the "SCBCA"), states that every corporation "has the same powers as an individual to do all things necessary or convenient to carry out its business and affairs ...." (Emphasis added). Without limiting the scope of the preceding sentence, §33-3-102 also lists certain specific powers granted to business corporations. Among these are the powers to:

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(4)

purchase, receive, lease, or otherwise acquire and own, hold, improve, use, and otherwise deal with real or personal property, or any legal or equitable interest in property, wherever located;

(5)

sell, convey, mortgage, pledge, lease, exchange, and otherwise dispose of all or any part of its property;

(7)

make contracts and guarantees, incur liabilities, borrow money, issue its notes, bonds, and other obligations .. ., and secure any of its obligations by mortgage or pledge of any of its property, franchises, or income;

(9)

be a promoter, partner, member, associate, or manager of any partnership, joint venture, trust, or other entity; [or]

(14)

transact any lawful business that will aid governmental policy.

The Honorable Ronald P. Townsend
The Honorable John C. Land, III
Page 3
July 23, 1999

The Official Comment to §33-3-102 states that the history of the Model Act (which South Carolina has adopted) "is largely one ensuring that corporate powers are broad enough to cover all reasonable business transactions." Consequently, it is the opinion of this Office that the SCRECA, either alone or by incorporating the comprehensive powers granted to private corporations in §33-3102, permits SCRECs, through a subsidiary or otherwise, to lawfully engage in the business of offering products and services other than electric power.

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Finally, this Office is aware that some states have impeded electric cooperatives from offering products and services other than electric power; nevertheless, we are not persuaded that a South Carolina court would reach the same conclusion. In those states that have litigated the diversification issue and settled upon a more restrictive approach, the enabling statutes in question have contained limiting language not present in the SCRECA. See Washington Electric Membership Corporation v. Avant, 256 Ga. 340, 348 S.E.2d 647 (Ga. 1986). Again, since this Office's opinion of nearly fourteen years has not been superseded by either judicial decision or legislative action, we have no alternative but to conclude that the prior opinion remains consistent with the intent of the General Assembly. I trust this information is responsive to your inquiry. If you have additional questions, please do not hesitate to contact me.

Sincerely yours,

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Zeb C. Williams, III
Deputy Attorney General

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REVIEWED AND APPROVED BY:

Robert D. Cook
Special Counsel