Utility cooperative
Encyclopedia
A utility cooperative is a type of cooperative
that is tasked with the delivery of a public utility
such as electricity
, water
or telecommunications to its members. Profits
are either reinvested for infrastructure
or distributed to members in the form of "patronage" or "capital credits", which are essentially dividend
s paid on a member's investment
into the cooperative.
Each customer
is a member and owner of the business with an equal say as every other member of the cooperative, unlike investor-owned utilities where the amount of say is governed by the number of shares held.
Many such cooperatives exist in the rural United States
, and were created by the New Deal
to bring electric power and telephone
service to rural
areas, when the nearest investor-owned utility would not provide service, believing there would be insufficient revenue to justify the capital expenditures required. Many electric cooperatives have banded together to form their own wholesale power cooperatives, often called G & Ts, for generation and transmission, to supply their member-owners with electricity.
Many utility cooperatives strive to bring the best service at the lowest possible cost, but often the high cost of maintaining the infrastructure needed to cover large, rural areas without the support of large cities as a rich customer base causes prices to be high. However, a few such co-ops have managed to tap into urban markets (due to growth into previously rural territory served by the co-ops) and have proven to be very cost-effective.
In Finland
the telephone network was largely built by telephone cooperatives. Instead of a telephone subscription, a telephone stock
is bought; there is also a lively secondary market for telephone stocks. The largest cooperative, known originally as the Helsinki Telephone Association (now Elisa Oyj
) was founded in 1882. Today, cooperatives such as PNWISE are working to bring broadband access to rural areas of the United States by the same means. In the UK, the Phone Co-op
was set up in 1998 to provide telecommunications services, and in 2011 Midcounties Co-operative launched Co-operative Energy to supply electricity and gas. As part of the community wind energy movement, Energy4all has sponsored the establishment of a dozen or so wind energy co-operatives.
) listed below, which are a general statement of how a cooperative operates (as opposed to traditional investor owned utilities):
s owned by their member co-ops.
which grows naturally in its service area and A&N Electric Cooperative in Virginia, is named so because it serves Accomac County and Northampton County
. For years after the Rural Electrification Administration was established, many rural residents in the US called cooperatives, regardless of their name, "REA" and would in turn say they were served by REA instead of the cooperative name if asked who their electric provider was. Today, some cooperatives, though, either by choice or by the guidance of state charter laws, carry a variation of the cooperative name. These include:
Several states have another variation of the utility cooperative and which are known as Public Power Districts (PPDs) in Nebraska and Public Utility Districts (PUDs) in Oregon and Washington. In both cases, the laws that created these 'quasi-cooperative' utilities were created with the specific intent of taking over territory being served by privately-owned power companies in those states. Nebraska's conversion from a mixture of power companies serving the state to a public power empire spanned the 1940s (the last privately-owned utility line into the state being cut on December 29, 1949), with the creation of the PUDs in the Pacific Northwest starting about the same time and continuing with varying degrees of success over the following two decades. The key difference between a PPD/PUD and a cooperative is that PPDs/PUDs are publicly controlled by residents of a state or local area and run more like a municipal power system than a cooperative system. A cooperative is owned and operated by the customers they serve within their designated service area. Cooperative owners have voting rights to elect the cooperative's board members each year and generally have more say in the operations than other utility forms.
Cooperative
A cooperative is a business organization owned and operated by a group of individuals for their mutual benefit...
that is tasked with the delivery of a public utility
Public utility
A public utility is an organization that maintains the infrastructure for a public service . Public utilities are subject to forms of public control and regulation ranging from local community-based groups to state-wide government monopolies...
such as electricity
Electricity
Electricity is a general term encompassing a variety of phenomena resulting from the presence and flow of electric charge. These include many easily recognizable phenomena, such as lightning, static electricity, and the flow of electrical current in an electrical wire...
, water
Water
Water is a chemical substance with the chemical formula H2O. A water molecule contains one oxygen and two hydrogen atoms connected by covalent bonds. Water is a liquid at ambient conditions, but it often co-exists on Earth with its solid state, ice, and gaseous state . Water also exists in a...
or telecommunications to its members. Profits
Profit (accounting)
In accounting, profit can be considered to be the difference between the purchase price and the costs of bringing to market whatever it is that is accounted as an enterprise in terms of the component costs of delivered goods and/or services and any operating or other expenses.-Definition:There are...
are either reinvested for infrastructure
Infrastructure
Infrastructure is basic physical and organizational structures needed for the operation of a society or enterprise, or the services and facilities necessary for an economy to function...
or distributed to members in the form of "patronage" or "capital credits", which are essentially dividend
Dividend
Dividends are payments made by a corporation to its shareholder members. It is the portion of corporate profits paid out to stockholders. When a corporation earns a profit or surplus, that money can be put to two uses: it can either be re-invested in the business , or it can be distributed to...
s paid on a member's investment
Investment
Investment has different meanings in finance and economics. Finance investment is putting money into something with the expectation of gain, that upon thorough analysis, has a high degree of security for the principal amount, as well as security of return, within an expected period of time...
into the cooperative.
Each customer
Customer
A customer is usually used to refer to a current or potential buyer or user of the products of an individual or organization, called the supplier, seller, or vendor. This is typically through purchasing or renting goods or services...
is a member and owner of the business with an equal say as every other member of the cooperative, unlike investor-owned utilities where the amount of say is governed by the number of shares held.
Many such cooperatives exist in the rural United States
United States
The United States of America is a federal constitutional republic comprising fifty states and a federal district...
, and were created by the New Deal
New Deal
The New Deal was a series of economic programs implemented in the United States between 1933 and 1936. They were passed by the U.S. Congress during the first term of President Franklin D. Roosevelt. The programs were Roosevelt's responses to the Great Depression, and focused on what historians call...
to bring electric power and telephone
Telephone
The telephone , colloquially referred to as a phone, is a telecommunications device that transmits and receives sounds, usually the human voice. Telephones are a point-to-point communication system whose most basic function is to allow two people separated by large distances to talk to each other...
service to rural
Rural
Rural areas or the country or countryside are areas that are not urbanized, though when large areas are described, country towns and smaller cities will be included. They have a low population density, and typically much of the land is devoted to agriculture...
areas, when the nearest investor-owned utility would not provide service, believing there would be insufficient revenue to justify the capital expenditures required. Many electric cooperatives have banded together to form their own wholesale power cooperatives, often called G & Ts, for generation and transmission, to supply their member-owners with electricity.
Many utility cooperatives strive to bring the best service at the lowest possible cost, but often the high cost of maintaining the infrastructure needed to cover large, rural areas without the support of large cities as a rich customer base causes prices to be high. However, a few such co-ops have managed to tap into urban markets (due to growth into previously rural territory served by the co-ops) and have proven to be very cost-effective.
In Finland
Finland
Finland , officially the Republic of Finland, is a Nordic country situated in the Fennoscandian region of Northern Europe. It is bordered by Sweden in the west, Norway in the north and Russia in the east, while Estonia lies to its south across the Gulf of Finland.Around 5.4 million people reside...
the telephone network was largely built by telephone cooperatives. Instead of a telephone subscription, a telephone stock
Stock
The capital stock of a business entity represents the original capital paid into or invested in the business by its founders. It serves as a security for the creditors of a business since it cannot be withdrawn to the detriment of the creditors...
is bought; there is also a lively secondary market for telephone stocks. The largest cooperative, known originally as the Helsinki Telephone Association (now Elisa Oyj
Elisa Oyj
Elisa Oyj is a Finnish telecommunications company founded in 1882 that was known until July 2000 as HPY. Elisa Oyj employs about 3000 people and in 2007 had revenue of about €1.57 billion...
) was founded in 1882. Today, cooperatives such as PNWISE are working to bring broadband access to rural areas of the United States by the same means. In the UK, the Phone Co-op
Phone Co-op
The Phone Co-op is a British telecommunications co-operative, which operates under self-imposed environmental and ethical guidelines. It provides telephone and internet services, including web hosting and broadband to private customers, businesses and charities...
was set up in 1998 to provide telecommunications services, and in 2011 Midcounties Co-operative launched Co-operative Energy to supply electricity and gas. As part of the community wind energy movement, Energy4all has sponsored the establishment of a dozen or so wind energy co-operatives.
Seven Principles of Cooperatives
Several cooperatives list on their respective websites the Seven Cooperative Principles (also known as the Rochdale PrinciplesRochdale Principles
The Rochdale Principles are a set of ideals for the operation of cooperatives. They were first set out by the Rochdale Society of Equitable Pioneers in Rochdale, England, in 1844, and have formed the basis for the principles on which co-operatives around the world operate to this day. The...
) listed below, which are a general statement of how a cooperative operates (as opposed to traditional investor owned utilities):
- Voluntary and Open Membership—Cooperatives are voluntary organizations, open to all persons able to use their services and willing to accept the responsibilities of membership, without gender, social, racial, political or religious discrimination.
- Democratic Member Control—Cooperatives are democratic organizations controlled by their members, who actively participate in setting policies and making decisions. The elected representatives are accountable to the membership. In primary cooperatives, members have equal voting rights (one member, one vote) and cooperatives at other levels are organized in a democratic manner.
- Members’ Economic Participation—Members contribute equitably to, and democratically control, the capital of their cooperative. At least part of that capital is usually the common property of the cooperative. Members usually receive limited compensation, if any, on capital subscribed as a condition of membership. Members allocate surpluses for any or all of the following purposes: developing the cooperative, possibly by setting up reserves, part of which at least would be indivisible; benefiting members in proportion to their transactions with the cooperative; and supporting other activities approved by the membership.
- Autonomy and Independence—Cooperatives are autonomous, self-help organizations controlled by their members. If they enter into agreements with other organizations, including governments, or raise capital from external sources, they do so on terms that ensure democratic control by their members and maintain their cooperative autonomy.
- Education, Training, and Information—Cooperatives provide education and training for their members, elected representatives, managers and employees so they can contribute effectively to the development of their cooperatives. They inform the general public, particularly young people and opinion leaders, about the nature and benefits of cooperation.
- Cooperation Among Cooperatives—Cooperatives serve their members most effectively and strengthen the cooperative movement by working together through local, national, regional and international structures.
- Concern for Community—While focusing on member needs, cooperatives work for the sustainable development of their communities through policies accepted by their members. (One of the ways that cooperatives and their member-owners participate is through Operation Roundup, whereby a member can voluntarily have their electric bill rounded up to the next highest dollar with the difference placed in a fund to be distributed to local charities. For example, a customer participating in the plan with a bill of $105.37 would see a bill for $106.00, and the remaining $0.63 credited to the fund.)
Electric Cooperatives
There are two types of electric cooperatives, distribution cooperatives and generation and transmission (G&T) cooperatives. Distribution electric cooperatives serve end-users, such as residences and businesses, who make up their membership. Generation and transmission cooperatives typically sell wholesale power to distribution cooperatives and are cooperative federationCooperative federation
A co-operative federation or secondary co-operative is a co-operative in which all members are, in turn, co-operatives.Historically, co-operative federations have predominantly come in the form of co-operative wholesale societies and co-operative unions...
s owned by their member co-ops.
Naming
Most electric cooperatives in the United States carry the name "electric cooperative" in their name, which makes it easy to identify their organization. Most cooperatives carry a name that identifies or explains some aspect of their service area. For example, Bluebonnet Electric Cooperative in Texas is named after the BluebonnetBluebonnet
Bluebonnet is a name given to any number of species of the genus Lupinus predominantly found in southwestern United States and is collectively the state flower of Texas...
which grows naturally in its service area and A&N Electric Cooperative in Virginia, is named so because it serves Accomac County and Northampton County
Northampton County, Virginia
As of the census of 2010, there were 12,389 people, 5,321 households, and 3,543 families residing in the county. The population density was 63 people per square mile . There were 6,547 housing units at an average density of 32 per square mile...
. For years after the Rural Electrification Administration was established, many rural residents in the US called cooperatives, regardless of their name, "REA" and would in turn say they were served by REA instead of the cooperative name if asked who their electric provider was. Today, some cooperatives, though, either by choice or by the guidance of state charter laws, carry a variation of the cooperative name. These include:
- Electric Cooperative Association
- Rural Electric Association
- Rural Electric Cooperative
- Rural Electric Cooperative Corporation (RECC)- Mainly used in Kentucky http://www.kaec.org/faq.htm
- Electric Membership Corporation (EMC)- Used in many states, such as North Carolina, Georgia, Tennessee, Alabama, etc.
- Rural Electric Membership Corporation (REMC)
- Electric Power Association (EPA)- Mainly used in Mississippi
- Power Cooperative
- Energy Cooperative
Several states have another variation of the utility cooperative and which are known as Public Power Districts (PPDs) in Nebraska and Public Utility Districts (PUDs) in Oregon and Washington. In both cases, the laws that created these 'quasi-cooperative' utilities were created with the specific intent of taking over territory being served by privately-owned power companies in those states. Nebraska's conversion from a mixture of power companies serving the state to a public power empire spanned the 1940s (the last privately-owned utility line into the state being cut on December 29, 1949), with the creation of the PUDs in the Pacific Northwest starting about the same time and continuing with varying degrees of success over the following two decades. The key difference between a PPD/PUD and a cooperative is that PPDs/PUDs are publicly controlled by residents of a state or local area and run more like a municipal power system than a cooperative system. A cooperative is owned and operated by the customers they serve within their designated service area. Cooperative owners have voting rights to elect the cooperative's board members each year and generally have more say in the operations than other utility forms.
Peer associations
Small cooperatives often band together to achieve economies of scale, share expertise and stand together on regulatory issues. There are several state-wide (and in Canada, province-wide) associations of cooperatives, including Kentucky http://www.kaec.org/faq.htm and Nova Scotia http://www.gov.ns.ca/energy/electricity/mun-elec-coop.asp http://ns1758.ca/electric/electricpwr10.htmlhttp://www.town.berwick.ns.ca/component/option,com_docman/Itemid,362/gid,560/task,doc_download/+Nova+Scotia+municipal+electric+utilities+corporation.See also
- Rural Utilities ServiceRural Utilities Serviceis an agency of the United States Department of Agriculture , one of the federal executive departments of the United States government charged with providing public utilities to rural areas in the United States via public-private partnerships...
- Touchstone EnergyTouchstone EnergyTouchstone Energy Cooperatives is a cooperative federation composed of over 660 local, consumer-owned utility cooperatives in 46 of the 50 United States. Touchstone Energy co-ops serve more than 30 million members. Electric utility cooperatives distribute power for 75 percent of the U.S. land mass...
- National Rural Electric Cooperative AssociationNational Rural Electric Cooperative AssociationThe National Rural Electric Cooperative Association is the organization that represents over 900 electric cooperatives in the United States. Independent electric utilities are not-for-profit and are owned by their members...
- Vector LimitedVector LimitedVector Limited is a multi-network infrastructure company in New Zealand. It is the national number one provider of electricity distribution, number one provider of gas transmission and distribution, number one provider of electricity and gas metering, number two wholesaler of LPG and number three...
a 75% utility coop in New Zealand - Public Utility DistrictPublic utility districtIn the United States, a public utility district is a special-purpose district or other governmental jurisdiction that provides public utilities to the residents of that district.PUDs are created by a local government body, such as a city, county, or...
External links
- National Rural Electric Cooperative Association, the national trade association of electric cooperatives
- Touchstone Energy, a national branding association of U.S. energy utility co-ops.
- History of Coops, a discussion of the history of cooperatives
- Texas Electric Cooperatives, a statewide organization dedicated to representing 65 electric distribution cooperatives and the 9 generation and transmission cooperatives.
- Georgia Electric Membership Corp., a statewide support and trade association for the 42 EMCs in GeorgiaGeorgia (U.S. state)Georgia is a state located in the southeastern United States. It was established in 1732, the last of the original Thirteen Colonies. The state is named after King George II of Great Britain. Georgia was the fourth state to ratify the United States Constitution, on January 2, 1788...
- Electric Cooperatives of Arkansas, a group of 17 electric cooperatives serving areas of ArkansasArkansasArkansas is a state located in the southern region of the United States. Its name is an Algonquian name of the Quapaw Indians. Arkansas shares borders with six states , and its eastern border is largely defined by the Mississippi River...
- GEMC GEORGIA Magazine, (formerly RURAL GEORGIA magazine) the official publication of the Electric Membership Cooperatives (EMCs) in GeorgiaGeorgia (U.S. state)Georgia is a state located in the southeastern United States. It was established in 1732, the last of the original Thirteen Colonies. The state is named after King George II of Great Britain. Georgia was the fourth state to ratify the United States Constitution, on January 2, 1788...
- Michigan Country Lines Magazine, published by the Michigan Electric Cooperative Association for consumers
- What's a Coop? at the Rural Telephone Service Company site
- Iowa Touchstone Energy Home, standards and giudelines for energy-efficient home construction
- REC InfoCenter, information for REC members, including energy efficiency, online classifieds and recipes
- Corn Belt Power Cooperative, Iowa-based generation and transmission rural electric cooperative whose member distribution cooperatives provide electricity to members in 41 northern Iowa counties
- Choptank Electric Coop, Maryland based transmission rural electric cooperative with members in 9 counties on the Eastern Shore
- Buckeye Power/Ohio Rural Electric Cooperatives, Ohio G&T and statewide association of electric cooperatives
- Pedernales Electric Cooperative, Services over 20 counties in Texas
- Southeastern Data Cooperative (SEDC), a national provider of utility-based technology and Billing/Accounting software
- Encyclopedia of Oklahoma History and Culture - Electric Cooperatives