Umair Gaines
Electric cooperatives, or co-ops, are energy providers that are built by and belong to the communities they serve. They are owned by their members or customers, who are typically automatically enrolled as members when they sign up for electric service. Electric co-ops are an alternative to commercial utility companies and are governed by an elected board of directors. They are designed to benefit their members, providing service at a price close to the cost of providing it. Electric co-ops are especially important in rural areas, where they provide electricity to over 99% of residents.
| Characteristics | Values |
|---|---|
| Definition | "Involving mutual assistance in working toward a common goal" |
| Ownership | Owned by its members or customers |
| Governance | Democratically controlled by members, who elect a board of directors |
| Purpose | To deliver electrical power to members in its service area |
| Customers | 42 million |
| Service area | 48 states |
| Businesses powered | Over 22 million |
| Annual return to members | $1 billion |
| Number of cooperatives | 834 distribution cooperatives and 63 generation and transmission cooperatives |
| Miles of lines | 2.5 million |
| Assets | $150 billion |
| Emission reduction | 83% reduction in sulphur dioxide emissions from 2005 to 2022 |
| 68% reduction in nitrogen oxide emissions from 2005 to 2022 | |
| 14% reduction in carbon dioxide emissions from 2005 to 2022 |
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What You'll Learn
Electric co-ops are not-for-profit
Electric cooperatives, or co-ops, are not-for-profit energy providers that serve as the engine of economic development for their communities. They are owned and operated by their members, who are also the consumers of the services they provide. This means that electric co-ops are focused on service rather than profits, and they are uniquely suited to meet local needs.
Co-ops are built by and belong to the communities they serve. They are led by members from the community, who are given a voice in the cooperative through democratic member control. This means that members can vote in board elections, participate in policy-making, and share their ideas and concerns.
Electric co-ops are tax-exempt and differ from municipalities and investor-owned utilities because they are not-for-profit. They return margins back to their members in the form of capital credits, which are allotted based on consumption. Members are required to "invest" in the cooperative by paying an initial registration fee and then continuously contributing capital through electricity payments.
Co-ops serve 42 million people in the United States, including 92% of persistent poverty counties. They power over 22 million businesses, homes, schools, and farms in 48 states. They return more than $1 billion to their consumer-members annually.
Co-ops are meeting member expectations by reducing emissions and switching to natural gas and renewables. They are also incorporating renewable energy sources to complement always-available generation.
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They are owned and controlled by members
Electric cooperatives are owned and controlled by their members. This means that all members have equal individual authority and a say in the cooperative's operations. Members are not just customers but are also owners of the cooperative, and they actively participate in setting policies and making decisions. Members elect a board of directors to represent their interests and make oversight decisions. This democratic structure is based on the Rochdale Principles, which were established by the Rochdale Society of Equitable Pioneers in 1844.
Electric cooperatives are not-for-profit organizations, which means they are fundamentally different from investor-owned utilities. Cooperatives are driven by service rather than profit, and they return margins back to their members in the form of capital credits. This is in contrast to investor-owned utilities, which are for-profit enterprises that aim to maximize returns for their shareholders.
The cooperative model is based on the idea of "involving mutual assistance in working toward a common goal." This model has been around for over a century and is used by many well-known companies, such as Ocean Spray, Sunkist Growers, and Land O'Lakes. Electric cooperatives specifically came about as a result of Franklin D. Roosevelt's New Deal in the early 1900s. At that time, utility companies believed that providing power to rural areas would not be profitable, so cooperatives were formed to ensure that rural residents had access to electricity.
Today, electric cooperatives serve millions of members across the United States, and they continue to be led by members from the communities they serve. Cooperatives also work to meet member expectations by reducing emissions and incorporating renewable energy sources.
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Co-ops are an alternative to commercial utility companies
Electric cooperatives, or co-ops, are a type of utility cooperative owned by its members or customers. They are an alternative to commercial utility companies, which are often investor-owned and profit-driven. Co-ops, on the other hand, are not-for-profit organisations that function as a cooperative, with members working towards the common goal of providing reliable and affordable electricity to their communities.
The concept of cooperatives is not new, with the first documented cooperative being the Rochdale Society of Equitable Pioneers in 1844. Cooperatives around the world use the Rochdale Principles, or the Seven Cooperative Operating Principles, to guide their operations. Electric cooperatives, in particular, are a product of Franklin D. Roosevelt's New Deal in the early 1900s. At that time, utility companies believed that providing power to rural areas would not be profitable, leaving most of rural America without access to electricity. The Rural Electrification Act of 1935 and the Tennessee Valley Authority (TVA) Act of 1933 brought about the creation of electric cooperatives, which now provide electricity to millions of people in rural areas.
Today, electric cooperatives serve approximately 42 million members in 47 states, with over 960 co-ops in the United States. They are built by and belong to the communities they serve, and they are led by members from these communities. This local leadership ensures that the co-ops are uniquely suited to meet the specific needs of their areas. Electric cooperatives are committed to providing reliable and affordable energy to their members, and they do so by utilising a diverse range of resources, including renewable energy sources.
Co-ops offer their members more than just electric service. As a member, you gain a voice in the cooperative, with the opportunity to participate in democratic member control. Members can vote to elect a board of directors, who then oversee the day-to-day operations of the co-op. Any profits made by the co-op are either reinvested in infrastructure or returned to the members in the form of capital credits or dividends. This model ensures that the cooperative remains focused on serving its members and improving the sustainability and well-being of their communities.
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They are governed by an elected board of directors
Electric cooperatives, or co-ops, are energy providers that are built by and belong to the communities they serve. They are owned by their members or customers, who are also the organisation's energy customers. This means that each member has a voice in the cooperative, receiving capital credits and locally owned and operated offices. Members are nominated to positions and voted on annually by the entire membership. They have equal status and influence, and they participate in policymaking.
Co-ops are governed by an elected board of directors, who are voted for by the members of the cooperative. This board of directors hires and oversees a management team that is responsible for the day-to-day operations of the utility. The board of directors represents the interests of the members in making oversight decisions for the co-op.
The seven core principles and values that guide cooperatives were adopted by the International Cooperative Alliance in 1995. These principles are key reasons why electric co-ops function differently from other electric utilities. As opposed to being for-profit and benefiting shareholders, cooperatives are designed to benefit their members.
The first cooperative documented was the establishment of the Rochdale Society of Equitable Pioneers in 1844, a group of 30 tradesmen in England. They are most famous for developing the Rochdale Principles, which are now known as the Seven Cooperative Operating Principles. Cooperatives all around the world use these seven basic principles to fundamentally run their establishments.
Electric cooperatives are a product of Franklin D. Roosevelt's New Deal. In the early 1900s, utility companies believed that building power lines into rural areas of America would not be profitable, so most of America was without electricity. The Rural Electrification Act of 1935 brought the Rural Electrification Administration (REA) to life.
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Electric co-ops reduce emissions
Electric cooperatives, or co-ops, are "generally defined as an electric utility owned by its members". They are not-for-profit organisations that serve their members, who are also their customers. Electric co-ops are built by and belong to the communities they serve.
Co-ops are meeting member expectations by reducing emissions through a combination of emission-reduction measures and switching to natural gas and renewables. Between 2005 and 2022, co-ops reduced sulphur dioxide emissions by 83%, nitrogen oxide emissions by 68%, and carbon dioxide emissions by 14%. Since 2016, co-ops have nearly doubled their renewable capacity from 8.2 gigawatts to nearly 15.8 gigawatts, with over 1.3 gigawatts of new renewable capacity added in 2023. Co-op wind farms and solar arrays generate enough electricity to power more than 3.5 million homes.
Co-ops are also investing in clean energy technologies, including solar, hydroelectric, and battery storage. As of early 2024, over 60 cooperatives in 30 states have been selected to negotiate funding of more than $1 billion in federal funding through the Infrastructure Investment and Jobs Act and the Inflation Reduction Act.
Co-ops are well-positioned to lead efforts to reduce carbon dioxide emissions and are taking advantage of new policies to do so. For example, Minnesota's new energy policy allows co-ops to grow their load with lower emissions, and the Environmental Protection Agency's Affordable Clean Energy (ACE) rule provides flexibility and certainty while addressing carbon emissions from existing power sources.
Co-ops are also advocating for policies that will help them continue to reduce emissions, such as the Inflation Reduction Act's direct-pay energy tax credits and the $9.7 billion U.S. Department of Agriculture program to assist co-ops with the energy transition.
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Frequently asked questions
A co-op electric company, or electric cooperative, is a private, nonprofit organization owned by its members or customers. Its principal purpose is to deliver electricity to the members living in its service area.
Unlike investor-owned utilities (IOUs), which are for-profit enterprises, a cooperative functions as a nonprofit and runs on a cost-of-service basis only. Co-ops are also governed by an elected board of directors, which means that members have a say in the decision-making process.
Joining a local electric co-op typically involves connecting to its grid and signing up for electric service. Being a customer often automatically makes you a co-op member, but there may be other ways to gain membership without paying for regular electric service.
