Chap. 442.—An ACT providing for the formation of non-profit corporations to
be known as Electric Cooperatives, for the purpose of promoting and en-
couraging the fullest possible use of electric energy in this State by making
electric energy available at the lowest cost consistent with sound economy and
prudent management of such cooperatives; providing for the rights, powers
and duties of such cooperatives; authorizing and regulating the issuance of
bonds and other obligations by such cooperatives, and providing for the pay-
ment of such obligations and the rights of the holders thereof; and providing
when the State Corporation Commission may require electric utility companies
to make electric energy available to communities not now served. [S B 251]

Approved March 30, 1936

1. Be it enacted by the General Assembly of Virginia, as follows:

Section 1. This act may be cited as the “Electric Cooperatives
Acts.”

Section 2. Purpose——Any number of natural persons not less than
five may, by executing, filing and recording a certificate as herein-
after set forth, form a cooperative, either with or without capital stock,
not organized for pecuniary profit, for the purpose of promoting and
encouraging the fullest possible use of electric energy by making elec-
tric energy available at the lowest cost consistent with sound economy
and prudent management of the business of such cooperatives.

Section 3. Definitions——The following terms whenever used or
referred to in this act, shall have the following meanings, unless a
different meaning clearly appears from the context:
(a) “Cooperative” shall mean an electric corporation formed under
this act.

(b) “Municipality” shall mean any city or incorporated town of
the State.

(c) “Person” or “inhabitant” shall mean and include natural per-
sons, firms, associations, cooperatives, corporations, business trusts,
partnerships and bodies politic.

(d) “Energy” shall mean and include any and all electric energy
no matter how or where generated or produced.

(e) “Acquire” shall mean and include construct, acquire by pur-
chase, lease, devise, gift or the exercise of the power of eminent domain,
or other mode of acquisition.

(f£) “System” shall mean and include any plant, works, system,
facilities, or properties, or any part or parts thereof, together with all
appurtenances thereto, used or useful in connection with the genera-
tion, production, transmission or distribution of energy.

(g) “Law” shall mean any act or statute, general, special or local
of this State.

(h) “Obligations” shall mean and include bonds, interim certificates
or receipts, notes, debentures, and all other evidences of indebtedness
either issued or the payment thereof assumed by a cooperative.

(1) “Federal agency” shall mean and include the United States of
America, the President of the United States of America, Tennessee
Valley Authority, the Federal Administrator of the Rural Electrification
Administration and any and all other authorities, agencies, and in-
strumentalities of the United States of America, heretofore or here-
after created.

(j) “Improve” shall mean and include construct, reconstruct, im-
prove, replace, extend, enlarge, alter, better or repair.

(k) “Board” shall mean the board of directors of a cooperative
formed under this act.

(1) “Member” shall mean and include each natural person signing
the certificate of incorporation of a cooperative and each person ad-
mitted to membership therein pursuant to law or its by-laws.

Section 4. Certificate of Incorporation.—The certificate of incor-
poration shall be entitled and endorsed “Certificate of Incorporation of
TG: 5 new ies Electric Cooperative” (the blank space being filled in
with the distinguishing part of the name of the cooperative) and
shall state:

(a) The name of the cooperative, which name need not contain
the word “corporation” or “incorporated” but shall be such as to
distinguish it from any other cooperative.

(b) A reasonable designation of the territory in which its opera-
tions are principally to be conducted.

(c) The location of its principal office and post office address
thereof. .

(d) The maximum number of directors, not less than five.

(e) The names and post office addresses of the officers and direc-
tors who are to manage the affairs of the cooperative for the first
year of its existence, or until their successors are chosen.

(£) The period, if any, limited for the duration of the cooperative.

(g) The terms and conditions upon which persons shall be ad-
mitted to membership in the cooperative, and in the case of a coopera-
tive incorporating with capital stock a statement of the maximum
and minimum amount of the capital stock of the cooperative, and its
division into shares.

The certificate of incorporation may also contain any provision
not inconsistent with law or the provisions of chapter one hundred
and fifty of the Code of Virginia which the incorporators may choose
to insert for the regulation of the business and the conduct of the
affairs of the cooperative ; and any provision as to the plan of financial
organization, or relating to the internal regulation or government of
the cooperative, its directors and members.

Section 5. Limitation—The words ‘Electric Cooperative” shall
not be used in the corporate name of corporations other than those
formed pursuant to the provisions of the act.

Section 6. Filing Certificate of Incorporation.—The natural per-
sons executing the certificate of incorporation shall be residents of the
territory in which the principal operations of the cooperative are to be
conducted who intend to use electric energy to be furnished by the
cooperative. The certificate of incorporation shall be subscribed by
at least five such persons and acknowledged by them before an officer
authorized by the law of this State to take and certify acknowledg-
ments of deeds and conveyances. When so acknowledged the cer-
tificate shall be filed in accordance with the provisions of section thirty-
eight hundred and sixty-six of the Code of Virginia, as amended; and
when so filed the said articles of incorporation, or certified copies
thereof, shall be received in all the courts of this State and elsewhere
as prima facie evidence of the facts contained therein, and of the due
incorporation of such cooperative. All of the provisions of the said
section thirty-eight hundred and sixty-six in so far as not inconsistent
with this act are hereby made applicable to such cooperatives, and as
soon as the charter is lodged for recordation in the office of the State
Corporation Commission, the proposed cooperative described therein,
under its designated name, shall be and constitute a body corporate,
with all of the applicable powers provided for in the said section.

Section 7. Board of Directors——Each cooperative formed here-
under shall have a board of directors of five or more members, which
board shall constitute the governing body of the cooperative. The
directors, other than those named in the certificate of incorporation,
shall be elected annually by the members entitled to vote. The directors
must be members and shall not be entitled to compensation for their
services as directors, except that a per diem of not to exceed five
dollars per day may be paid directors for attending regular and special
meetings of the board. Directors shall be entitled to reimbursement for
expenses incurred by them in the performance of their duties. The
directors shall elect annually from their own number a president and
one or more vice-presidents. They shall also elect a secretary and a
treasurer, who need not be directors or members, and may combine the
two latter offices and designate the combined office as _ secretary-
treasurer.

Section 8. Powers of Board of Directors——The board of directors
of a cooperative shall have power to do all things necessary or inciden-
tal in conducting the business of the cooperative, including, but not
limited to:

(a) If authorized by the certificate of incorporation, or by resolu-
tion of its members having voting power, the power to adopt and
amend by-laws for the management and regulation of the affairs of the
cooperative, subject, however, to the right of such members to alter or
repeal such by-laws. The by-laws of a cooperative may make provi-
sions, not inconsistent with law or its certificate of incorporation,
regulating the admission, suspension or expulsion of members; the
transfer of memberships ; the fees and dues of members and the termina-
tion of memberships on non-payment of dues or otherwise; the number,
times and manner of choosing, qualifications, terms of office, official
designations, powers, duties and compensation of its officers; defining
a vacancy in the board or in any office and the manner of filling it;
the number of members, not less than ten per centum of the total
number of members, to constitute a quorum at meetings, the date of
the annual meeting and the giving of notice thereof and the holding
of special meetings and the giving of notice thereof; the terms and
conditions upon which the cooperative is to render service to its mem-
bers, the disposition of the revenues and receipts of the cooperative ;
regular and special meetings of the board and the giving of notice
thereof.

(b) To appoint agents and employees and to fix their compensa-
tion and the compensation of the officers of the cooperative; provided
that no officer, employee or agent may be paid more than six thousand
dollars total compensation in any calendar year.

(c) To execute all instruments.

(d) To make its own rules and regulations as to its procedure.

Section 9. Membership.—A cooperative shall issue to its members
certificates of membership and each member shall be entitled to only
one vote at the meetings of the members of the cooperative. The
liability of each member shall be limited to the unpaid portion of his
membership fee or subscription to capital stock, and any unpaid bills
for electric energy or machinery or appliances purchased from the
cooperative. The equity of members of a non-stock cooperative shall
be in proportion to the revenue paid the cooperative by each member.

Section 10. Service to Members.—Except as hereinafter provided,
the corporate purpose of each cooperative formed hereunder shall be
to render service to its members only, and no person shall become or
remain a member unless such person shall use electric energy supplied
by such cooperative and shall have complied with the terms and con-
ditions in respect to membership contained in the by-laws of such
cooperative. The membership fee of the cooperative shall not exceed
ten dollars ($10.00). Should the cooperative acquire any electric facili-
ties already dedicated or devoted to the public use it may, for the
purpose of continuing existing service and avoiding hardship, continue
to serve the persons served directly from such facilities at the time
of such acquisition without requiring that such persons become mem-
bers. In no event shall the number of such non-members served ex-
ceed forty-nine per centum (49%) of the total number of persons
served by the cooperative. Such non-member customers shall have
the right to become members upon non-discriminatory terms. The rates
to such non-members shall be on a cost basis similar to those charged
members.

Section 11. Powers Granted.—Each corporation formed under this
act shall have power to do any and all acts or things necessary or
incidental for carrying out the purpose for which it was formed, in-
cluding, but not limited to:

(a) To produce, generate, transmit and distribute electric energy.

(b) To sue and be sued.

(c) To have a seal and alter the same at pleasure.

(d) To acquire, hold and dispose of property, real and personal,
tangible and intangible, or interests therein and to pay therefor in
cash or property or on credit, and to secure and procure payment of all
or any part of the purchase price thereof on such terms and conditions
as the board shall determine.

(e) To render service and to acquire, own, operate, maintain and
improve a system or systems.

(f) To accept gifts or grants of money, property, real or personal,
from any person, municipality or federal agency and to accept volun-
tary and uncompensated services.

(g) To sell, lease, mortgage or otherwise encumber or dispose of
all or any part of its property, as hereinafter provided.

(h) To contract debts, borrow money and to issue or assume the
payment of bonds, and other obligations.

(1) To fix, maintain and collect reasonable fees, rents, tolls and
other charges for service rendered.

(j) To exercise all the powers set forth in section thirty-eight
hundred and sixty-six of the Code of Virginia, as amended, including
the power of eminent domain as prescribed for other public service
corporations by general law.

(kx) To assist its members, by loans or otherwise, in the acquisition
by them of such installation and wiring, and the obtaining of such
machinery, equipment and appliances, as will enable them to secure
the greatest benefit from the use of energy supplied by the cooperative.

(1) To issue non-assessable non-voting common and_ preferred
capital stock and pay non-cumulative dividends thereon not exceeding
six per centum per annum and no cooperative operating hereunder
shall pay more than six per centum per annum interest on membership
capital.

(m) To perform any and all of the foregoing acts and to do any
and all of the foregoing things under, through or by means of its own
officers, agents and employees, or by contracts with any person, federal
agency or municipality.

Section 12. Disposition of Property—No cooperative may sell,
mortgage, lease or otherwise encumber or dispose of any of its prop-
erty (other than (one) property which, in the judgment of the board,
is neither necessary nor useful in operating and maintaining the co-
operative’s system and which in any one year shall not exceed ten per
centum in value of the value of all the property of the cooperative, or
(two) merchandise), unless authorized so to do by the votes of at
least a two-thirds majority of its members.

Section 13. Issue Obligations——A cooperative formed hereunder
shall have power and is hereby authorized, from time to time, to issue
its obligations in anticipation of its revenues for any corporate pur-
pose. Said obligations may be authorized by resolution or resolutions
of the board, and may bear such date or dates, mature at such time
or times, not exceeding forty years from their respective date, bear
interest at such rate or rates not exceeding six per centum per annum,
payable at such times, be in such denominations, be in such form,
either coupon or registered, carry such registration privileges, be
executed in such manner, be payable in such medium of payment, at
such place or places, and be subject to such terms of redemption, not
exceeding par and accrued interest, as such resolution or resolutions
may provide. Such obligations may be sold in such manner and upon
such terms as the board may determine at not less than par and accrued
interest. Pending the preparation or execution of definitive bonds,
or obligations, interim receipts or certificates of temporary bonds may
be delivered to the purchaser of said obligations.

Section 14. Covenants.—In connection with the issuance of any
obligations a cooperative may make covenants or agreements and do
any and all acts or things that a corporation can make or do under
the laws of the State of Virginia.

Section 15. Purchase Obligations——A cooperative shall have power
out of any funds available therefor to purchase any obligations issued
by it at a price not exceeding the principal amount thereof and accrued
interest thereon. All bonds so purchased shall be cancelled.

Section 16. Consolidation—Any two or more cooperatives created
under the provisions of this act may enter into an agreement for the
consolidation of such cooperatives. Such agreement shall set forth the
terms and conditions of the consolidation, the name of the proposed
consolidated cooperative, the number of its directors, not less than
five, the time of the annual meeting and election and the names of at
least five persons to be directors until the first annual meeting. If such
agreement is approved by the votes of a majority of the members of
each cooperative after due notice as prescribed in chapter one hundred
and forty-seven of the Code of Virginia, the directors named in the
agreement shall subscribe and acknowledge a certificate conforming
substantially to the original certificates of incorporation, except that
it shall be entitled and endorsed “Certificate of Consolidation of
TTT TTT TTT ” (the blank space being filled in with the names of the
cooperatives being consolidated) and shall state:
First. The names of the cooperatives being consolidated.

Second. The name of the consolidated cooperative.

Third. The other items required or permitted to be stated in an
orginal certificate of incorporation.

Such certificate of consolidation and a certified copy or copies
thereof shall be filed and recorded in the same places as an original
certificate of incorporation and thereupon the proposed consolidated
cooperative, under its designated name, shall be and constitute a body
corporate with all the powers of a cooperative as originally formed
hereunder.

Section 17. Rates and Refunds.—A cooperative formed hereunder
shall be required to furnish reasonably adequate services and facilities,
subject to the regulations of the State Corporation Commission, as
provided in section eighteen of this act. The charge made by any
such cooperative for any service rendered or to be rendered, either
directly or in connection therewith, shall be non-discriminatory, reason-
able and just, and every discriminatory, unjust or unreasonable charge
for such service is prohibited and declared unlawful. A reasonable
and just charge for service within the meaning of this section shall
be such charges as shall produce sufficient revenue to pay all legal
and other necessary expense incident to the operation of its system,
to include maintenance cost, operating charges, upkeep, repairs, interest
charges on bonds or other obligations, to provide for the liquidation
of bonds or other evidences of indebtedness, to provide adequate funds
to be used as working capital, as well as reasonable reserves and funds
for making extensions and replacements and also for the payment of
any taxes that may be assessed against such cooperative or its property,
it being the intent and purpose hereof that such charges shall produce
an income sufficient to maintain such cooperative property in a sound
physical and financial condition to render adequate and efficient serv-
ice. Any rate, too low to meet the foregoing requirements shall be
unlawful. Revenues and receipts not needed for the above and fore-
going purposes shall be returned to the members on a pro rata basis
according to the amount of revenue paid for energy consumed, either
in cash or in abatement of current charges for energy, as the board
may decide. At the close of each fiscal year each member shall be
issued capital stock or other evidence of equity in the amount of
money from revenue applied to any sinking fund for the liquidation
of indebtedness or to the liquidation of any indebtedness of the co-
operative for the acquisition of its system.

Section 18. Regulation——Any cooperative organized under this act
shall be subject to the jurisdiction of the State Corporation Commis-
sion in the same manner and to the same extent as are other similar
utilities under the laws of the State of Virginia.

Section 19, Dissolution—Any cooperative created hereunder may
be dissolved in the manner prescribed by section thirty-eight hundred
and ten of the Code of Virginia.

Section 20. Charter Amendments.—A cooperative created here-
under may amend its certificate of incorporation to change its corporate
name, to increase or reduce the number of its directors or change any
other provision therein, provided, however, that no cooperative shall
amend its certificate of incorporation to embody therein any purpose,
power or provision which would not be authorized if its original cer-
tificate including such additional or changed purpose, power or provi-
sion were offered for filing at the time a certificate under this section
is offered. Such amendment may be accomplished in the method
prescribed by law for corporations generally.

Section 21. Charter Fees.—The general laws of Virginia relating
to fees and other charges in connection with issuing charters, amend-
ments thereto, consolidations and dissolutions of corporations organ-
ized on a mutual basis or without capital stock, shall apply to co-
operatives organized under the provisions of this act.

Section 22. Conflicting Laws.—This act is to be liberally con-
strued and the enumeration of any object, purpose, power, manner,
method or thing shall not be deemed to exclude like or similar objects,
purposes, powers, manners, methods or things, and any provisions of
other laws in conflict with the provisions of this act shall not apply to
cooperatives operating hereunder.

Section 23. Adoption of Provisions——Any Virginia corporation
engaged in the production, generation, transmission or distribution of
electric energy in the State, may come under the provisions of this
act by filing with the Corporation Commission a Certificate of Adop-
tion, in accordance with the provisions of section twenty-four of the
Cooperative Marketing Act, and relinquishing all rights and powers
granted by the former charter.

Section 24. If, from any rural territory not now being served,
application be made to the State Corporation Commission by a group
of five or more persons, natural or artificial, to require an extension
of electric service to such territory, the Commission shall, if necessary
to accomplish the purposes sought, fix a time for hearing said applica-
tion, on such terms and conditions as the Commission may prescribe,
and, if it be established to the satisfaction of the Commission that a
proper guaranteed revenue for a sufficient number of years will accrue
to any company which may be required to construct the desired exten-
sion, and that a reasonable investment will accrue to the company
constructing said extension, then the Commission 1s hereby authorized
and empowered to require the nearest, or most advantageously located
electric utility company to such territory to construct such extension
to such point or points in such territory and to serve such customer
or customers therein, as in its judgment is right and proper.

Section 25. Constitutionality—-If any provision of this act, or the
application of such provision to any person, body, or circumstance, shall
be held invalid, the remainder of this act, or the application of such
provisions to persons, bodies, or circumstances, other than those as to
which it shall have been invalid, shall not be affected thereby.