Co-op Sectors

Utility Co-ops

UTILITY CO-OPS

Utility and energy co-ops benefit local communities through cooperative enterprise. Utility service cooperatives are owned and governed by the customers they serve, particularly in rural communities that investor-owned utility companies have neglected. In a utility co-op, a community’s power is in the hands of its residents.

Utility cooperatives manage public services such as electricity, water and telecommunications. Each member has a voice in the governance of the co-op and delivery of its services. As shareholders, customers benefit from the co-op’s profits, which are either reinvested in the organization or distributed to members as dividends.

KEY FACTS ABOUT UTILITY CO-OPS

Millions of Americans enjoy the safe and affordable utility services that energy cooperatives provide. Here are a few facts about the impact of utility co-ops:

  • Electric co-ops account for more than 33% of the U.S. electric utility industry
  • The National Electric Cooperative Association serves more than 42 million customers across 47 states
  • Over 18 million homes, businesses and schools are powered by energy co-ops
  • There are about 260 telephone co-ops in the U.S. with total annual revenues of $3.9 billion
  • One example of a utility co-op is the National Electric Cooperative Association.

WHAT IS A UTILITY CO-OP?

Unlike public utility companies, utility co-ops are organizations of individuals called members who share ownership of the business and are also its customers. Joining is voluntary, and the members run the company democratically. As a result, every member enjoys the same status and works together to ensure the delivery of critical utilities to each other.

This ownership structure significantly differs from publicly held companies, which are typically owned by shareholders who collect dividends. Conversely, utility co-ops often reinvest their profits into their infrastructure to promote continued service.

A BRIEF HISTORY

Utility cooperatives appeared after the New Deal in response to a rural modernization effort. In the 1930s, 90% of U.S. citizens living in cities had electricity, while 90% of rural homes did not. Utility services co-ops were first formed by residents of rural communities where power companies refused to provide service. Most cooperatives remain highly localized, though the board determines the actual service area.

Today, energy and utility cooperatives serve their communities’ need for reliable and affordable energy, water and other public utilities. Members exercise their vote by participating in the policy-making process and electing board members.

Utility co-ops focus on serving their member-customers and the community, not making a profit to satisfy investors. Many cooperatives partner with local organizations to support small businesses and create new jobs. Energy cooperatives empower residents to come together and create a more sustainable way to power their community.

THE IMPORTANCE OF UTILITY CO-OPS

Without cooperative organizations, some rural areas could still lack access to necessities like water and power. Electricity co-ops are one of the most common, with an estimated one in eight Americans belonging to one today. These organizations are hubs of transformation and environmental responsibility. They’re among the leaders in seeking and implementing alternative energy solutions. Additionally, many co-ops are now setting goals to expand their delivery to additional services, such as broadband internet.

TYPES OF UTILITY CO-OPS

There are numerous types of utility cooperatives serving customers countrywide.

ELECTRICITY CO-OPS

Electricity co-ops often consist of two arms ‚ÄĒ a generation and transmission (G&T) co-op and a distribution co-op. G&T entities generally own and run the power generation facilities and the lines transmitting electricity to distribution points. Distribution co-ops buy the power from the G&T organization and pass it along to the final customer destination through their owned systems.

TELECOMMUNICATION CO-OPS

Telecommunications co-ops provide their member customers with communication services such as:

  • Voice communications
  • Cellular systems
  • Television
  • Video
  • Data
  • Internet access

There are currently 260 of these co-ops in the U.S., serving 31 states and over 1 million people. Although this amounts to only 5% of telephone subscribers, the service area comprises over 40% of the country’s land.

WATER AND SEWAGE CO-OPS

Water and sewer cooperatives operate similarly to power co-ops, with their members electing a board of directors for oversight. Some of these organizations keep operations and maintenance in-house, while others outsource those functions to third-party partners. Additionally, some maintain private wastewater treatment facilities, while others will contract with nearby municipalities and transfer the material for processing.

BENEFITS OF UTILITY CO-OPS

Utility co-ops have numerous advantages for the communities they serve.

HIGHER QUALITY OF LIFE

Because co-ops are responsible for essential service delivery to primarily rural areas, they help improve the quality of life in the places they serve. These organizations create local jobs and deliver other cultural and social benefits. Co-ops also provide the framework for community members to access crucial services like telehealth and online education.

EXCEPTIONAL MEMBER EXPERIENCES

With profit as a secondary thought, co-ops are free to focus their efforts on member and community service. Their structure allows for members to be active in their management, with opportunities to vote and participate in decision-making.

Members also maintain some control over the co-op’s finances. That oversight can help keep prices affordable or determine which future investments to make. Additionally, the members have a say in how to allocate any surplus, with the potential to share profits as capital credits to their membership base.

INNOVATION

Many of today’s co-ops are pioneers in the transition to renewable and clean energy technologies. Their rural locations allow them to maximize investments like solar and wind farms. As a result of these organizations’ commitments to sustainability, they’re consuming fewer natural resources and contributing to a healthier planet.

Modern co-ops apply this forward-thinking philosophy to the entirety of their operations. They’re using cutting-edge technology to create an agile electric grid capable of scaling with demand.

EXAMPLES OF UTILITY CO-OPS

Cooperatives have a positive, lasting impact on a community’s societal and economic growth. These organizations work to strengthen co-ops in the U.S. and internationally:

WE DEFEND COOPERATIVE ENTERPRISE

At NCBA CLUSA, we develop and protect the cooperative business model in communities across the globe.

Currently, our team works in 20 countries across Africa, Latin America and Southeast Asia to form innovative cooperative structures and build resilient communities. At the federal level, we advocate in Washington, D.C., to provide greater visibility into the economic impact of cooperative enterprise.

Our members help us build a better world through education, representation and advocacy. Become a member today and join our ongoing work to advance cooperative businesses.

Want to learn more about NCBA CLUSA? Contact us today.

CONTACT US BECOME A MEMBER