Is it mandatory for water co-ops to carry a reserve account?
A reserve account is mandatory as directed by the Rural Utilities Act, Section 17, which states; “The directors of an association supplying one or more of electricity, gas or water that owns works shall in accordance with the regulations, maintain a reserve for the replacement, extension or increase in capacity of its works.”
Although the Act does not specify an amount of what you should carry, the recommendation is to use 2% of your system value per year.
Why do water co-ops need to carry general liability and bond insurance?
It is required under the Rural Utilities Act Standard By-laws Section 19, to carry insurance. The Standard By-laws state,
“……an association that owns works.
……shall carry blanket position bonding for all directors, officers and employees of the association.
…..shall at all times carry comprehensive public liability and property damage insurance, including standard non-owned automobile liability coverage and contingent employer’s liability coverage.”
Consumers, government and the courts demand greater accountability. Prosecution, fines, administrative penalties, high damage awards and quick resort to litigation are becoming the norm. Insurance and ongoing risk management processes are a necessity.
Directors in particular, are responsible for the day to day management of the co-op and have legal responsibilities that go with the position. Directors must at all times, keep themselves “reasonably” informed about activities of the co-op. Co-ops that serve residential customers are subject to stringent regulation by Alberta Environment under the Environmental and Enhancement Act.