About Electric Co-Ops
Millions of customers rely on cooperative groups to provide their power services, but what is an electric co-op? Electric cooperatives are not-for-profit businesses owned and controlled by the people who use their services. The two central characteristics of electric cooperatives are: Customers—the member-owners—own the business and participate in its financial success through the decreased cost of services. Member-owners have representation on and vote for the board of directors, adhering to the principle of one person, one vote.
When investor-owned utilities determined that sparsely populated rural communities would not provide investors the returns they could achieve elsewhere, local residents and the federal government worked together to build consumer-owned electric cooperatives that profoundly changed rural communities and agricultural production. The story of rural electrification illustrates the transformative potential cooperative enterprise has when coupled with the policy environment that enables co-op development and, ultimately, advances a more inclusive economy.
KEY FACTS ABOUT ELECTRIC CO-OPS
Interesting facts about modern electric co-ops include:
- They support over 40 million people and serve more than 90% of counties classified as “persistently impoverished.”
- Electric co-ops provide power to over half the United States land mass.
- There are currently more than 800 distribution cooperatives that have built power delivery infrastructure to serve individual customers.
- Over 60 generation and transmission co-ops provide wholesale power to their distribution co-op partners.
- Electric co-ops are leading the way in cutting their carbon footprints — from 2005 to 2021, these companies reduced carbon dioxide emissions by 17%, sulfur dioxide by 82% and nitrogen oxide by 68%.
- These organizations are pioneers in alternative and clean energy solutions.
- Critical industry focus includes modernizing the grid and preparing for a transition to a more electrified economy.
- Securing infrastructure from cyber attacks is another priority.
- Electric cooperatives scored higher in customer satisfaction than any investor-owned utility, according to J.D. Power 2022 survey data.
- These organizations have installed smart meters across 81% of their customer base versus non-co-ops at 67%.
- Numerous electric co-ops are actively working to expand their service delivery to provide broadband access to their member-customers.
BENEFITS OF ELECTRIC CO-OPS
Electric cooperatives have several advantages over investor-owned power suppliers.
Sharing in the Profits
Buying in to an electric co-op instantly gives the customer voluntary collective ownership in the organization. As a result of this equity, they’re eligible to share in any profits the group generates. Unlike dividends paid to a stockholder, co-ops generally distribute these as capital credits to reduce the cost of the member-customer’s power.
Focusing on Service
Electric co-ops emerged to meet the needs that for-profit power companies weren’t filling. These nonprofit entities are able to concentrate on their primary mission — serving members — rather than chasing return on investment for their shareholders. As a result, these organizations can use their resources for valuable service-related improvements, consumer education and more.
Contributing to a Better Community
Electric co-ops serve those who live and work in the same communities in which they operate. They create jobs for residents and maintain local connections with their customers. Cooperatives also support surrounding businesses by keeping money in the area.
Additionally, these organizations demonstrate a significant commitment to caring for the environment. Sustainability initiatives have helped reduce resource consumption and create healthier communities.
ELECTRIC CO-OP ASSOCIATIONS
Multiple organizations provide international support and promotion for electric co-ops, including:
- National Rural Electric Cooperative Association
- Cooperatives for a Better World
- National Cooperative Services Corporation
- International Co-operative Alliance
Numerous states and regions have their own cooperative associations, including:
- Pennsylvania Rural Electric Association, serving the Keystone State and New Jersey electric co-ops
- Virginia, Maryland and Delaware Association of Electric Cooperatives
- Tennessee Electric Cooperative Association
- Iowa Association of Electric Cooperatives
- Indiana Electric Cooperatives
- Electric Cooperatives of Mississippi
- Electric Cooperatives of South Carolina
- Minnesota Rural Electric Association
EMPOWER A MORE EFFICIENT CO-OP WITH NCBA CLUSA
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The ABCs of Electric Co-op Impact
Access: Largely abandoned by investor-owned utilities that were either unwilling or unable to invest in the infrastructure needed to bring electricity to farmers and ranchers, rural Americans formed cooperatives to meet their need for reliable, affordable electricity with loans from the federal Rural Electrification Administration. By the early 1950s, about 90 percent of rural farms and households had electricity.
Business Sustainability: In the mid-20th century, reliable electric power transformed the operation of family farms. Almost a century later, electric co-ops efficiently serve both competitive and hard-to-serve markets. On average, electric cooperatives serve 8 customers per mile, compared to 32 for other utilities. And they are beginning to bring high-speed internet access to the 39 percent of rural America ignored by investor-owned firms.
Community Commitment: Rural electric co-ops play a leading role in critical areas of community and civic engagement, such as renewable energy adoption. America’s newest electric co-op—Kaua’i Island Electric Cooperative— was established in 2002 when a group of local residents and business leaders purchased the utility when its investor-owners threatened to close. At the time, electric prices on Kaua’i Island were 73 percent higher than on neighboring Oahu, and electric generation was almost totally dependent on petroleum. In its first 15 years, the co-op has lowered costs to within 17 percent of its neighboring island, and shrunk fossil fuel dependence to just over 50 percent, with the rest coming from renewable sources. On a sunny afternoon, 99 percent of the co-op’s power is generated from solar.
Democratic Governance And Empowerment: Rural electric co-ops are built by and belong to the communities they serve. They are central to their communities and uniquely positioned to encourage democratic participation among their members. The Co-ops Vote initiative by America’s Electric Cooperatives is a non-partisan project designed to inform co-op voters on key issues facing electric coops, promote voter registration and encourage them to support their co-ops and the communities they serve when they cast their ballots.
Equity, Diversity, And Inclusion: With their expertise in infrastructure development and deployment, rural electric co-ops are poised— once again—to transform life in rural America by bringing broadband to the estimated 24 million American households that remain disconnected from 21st-century economic opportunities. Some rural electric co-ops also offer on-bill financing programs, allowing low-income customers to benefit from immediate updates in energy efficiency, along with long-term cost savings and environmental benefits.
Financial Security And Investment: Electric co-ops support more than 611,000 jobs nationwide, offering a significant source of stable employment—particularly in rural counties that are more likely to experience persistent poverty. Widespread electricity and growing access to broadband, too, has allowed countless rural businesses to thrive, adding new jobs to the rural economy.
Growth: A 2017 study found that the economic gains of early electrification lasted for decades afterward. While the direct gain in agricultural productivity happened over a short period of time, growth in area income, property values and non-agricultural employment lasted much longer.12 Today, electric co-ops invest $12 billion annually in local economies, and the sector contributes $88.4 billion to the U.S. GDP annually.
BARC ELECTRIC COOPERATIVE: INVESTING IN BROADBAND TO TRANSFORM RURAL LIFE
BARC Electric Cooperative General Manager Mike Keyser says the utility cooperative is “in the quality of life business.” The 2,000 members of the rural Shenandoah Valley, Virginia community served by the cooperative got quite a boost when the co-op board voted to add broadband to its services. While large electric and cable companies scoop up lucrative populated areas to provide broadband services, rural areas are often left behind, leaving local businesses without the tools they need to stay competitive and students without reliable digital access to information. Federal Communications Commission data indicates that 39 percent of rural Americans do not have access to broadband service, compared to 4 percent of city dwellers.
Utility cooperatives like BARC help address inequities in areas deemed “unprofitable” by investors. Lack of access to broadband affected overall business sustainability in BARC’s service area and hampered educational achievement for area youth. As a utility, BARC knew their business could only grow at the rate of business and household formation, so if these declined, so would the co-op. While the challenges of financing, building, and maintaining a whole new communications system were daunting for the small co-op, BARC leaders also realized their future depended on it. As Keyser put it, “It became apparent that this one is on us, no one else is going to do it.” Not only that but “it was our heritage, it is our mission” to serve the community in this way.
Motivated by community need and free of investor demands for immediate returns, the cooperative could take a longer view of its broadband investment. While investor-owned utility services aim to recoup investments in three to four years, member-owned cooperatives can finance capital costs over ten years or more. The community benefits of BARC’s decision to provide broadband services extend far beyond the ability to stream Netflix.
Broadband access boosted Rockridge County Elementary School’s internet speed from 3 megabytes to 250 overnight at a fraction of the previous cost. Local businesses now have internet access to meet their business needs. As the BARC example shows, utility cooperatives are vital to the long-term economic health of rural communities. Their unique ability to succeed without an excessive drive for profits allows for a more community-based model of service, ensuring that when the cooperative succeeds, everyone else does too.