Umair Gaines
Electric cooperatives, or co-ops, are private, non-profit organisations owned and governed by their members or customers. They are tasked with delivering electricity to their members living in their service area. Electric co-ops are an alternative to commercial utility companies, and they are built by and belong to the communities they serve. Members of co-ops are not just customers but owners, and they have equal status and influence, participating in policymaking and working together to improve sustainability and the good of their community.
| Characteristics | Values |
|---|---|
| Definition | A utility cooperative tasked with delivering electricity to its members. |
| Ownership | Owned by its members or customers. |
| Purpose | Deliver electricity to customers or members. |
| Members | 42 million Americans are served reliable electricity daily by electric co-ops. One in eight Americans is a member of an electric co-op. |
| Governance | Democratically elected board of directors. |
| Decision-making | Decisions are based on the needs of their local communities. |
| Revenue | Revenue is either reinvested in infrastructure or returned to members as capital credits. |
| Fuel mix | 85% from coal, natural gas, nuclear and hydroelectric power. |
| Emission reduction | Co-ops reduced sulphur dioxide emissions by 86% from 2005 to 2023. |
| Environmental benefits | Leading the way in the transition to clean energy. |
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What You'll Learn
Electric co-ops are owned by their members, not shareholders
Electric cooperatives, or co-ops, are unique businesses that are owned by their members, not shareholders. These not-for-profit entities are run for and by the people who use their services, with customers becoming member-owners when they buy into the co-op. This means that co-ops are focused on serving their members rather than generating returns for investors.
The electric co-op model emerged in the United States around 75 years ago when residents of rural areas struggled to access electricity. Private power companies saw little financial incentive to serve these sparsely populated areas, so local residents joined forces to create their own electric providers. With the help of federal loans, cooperatives were formed to generate, transmit, and supply electricity to their communities on a not-for-profit basis.
Today, electric co-ops continue to be built by and belong to the communities they serve. They are led by members from the community and are focused on meeting local needs. Co-op members often have a say in operational matters, such as rate increases, infrastructure investment, and how to spend budget surpluses. Surpluses are typically distributed as credits to members to reduce their power costs, rather than being categorized as profits for shareholders.
Co-ops are also able to explore different options, fuels, and technologies to meet their members' evolving energy needs. For example, co-ops are increasingly investing in natural gas and renewable energy sources, leading the way in the transition to clean energy. This not only benefits the environment but also brings cost savings and economic growth to co-op communities.
Electric co-ops are distinct from publicly owned utilities, which are owned and operated by local governments or semi-autonomous public entities. While co-ops are owned by their members, publicly owned utilities are ultimately owned and controlled by an existing government, such as a municipality, state, or federal government.
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They are private, non-profit organisations
Electric cooperatives, or co-ops, are private, non-profit organisations. They are owned and governed by their members, who are also their customers. Members of electric cooperatives are typically individuals and businesses from the communities that the cooperatives serve.
Co-ops are an alternative to commercial utility companies, which are for-profit enterprises that answer to their shareholders and investors. Unlike commercial utility companies, co-ops exist solely for the purpose of serving their communities. They are built by and belong to these communities, and they are led by members from the community. As such, co-ops are uniquely suited to meet local needs.
Co-ops make decisions on how best to meet demand based on the needs of their local communities. For example, some co-ops are investing in new natural gas projects to meet growing demand, while others are developing geothermal energy storage or recommissioning nuclear power plants.
Co-ops are also leading the way in the transition to clean energy. According to the National Rural Electric Cooperative Association (NRECA), electric cooperatives have drastically reduced emissions over the last decade through improvements at power plants and by switching to greater natural gas and renewable energy sources. Since 2010, co-ops are using 145% more renewable energy, including solar, hydro, and wind power.
Co-ops function through democratic means, with members voting to elect a board of directors that hires and oversees a management team responsible for day-to-day operations. Members have equal status and influence and participate in policymaking, working together for the good of their community.
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Members vote on operational matters and elect boards
Electric cooperatives, or co-ops, are private, non-profit organisations owned and operated by their members or customers. They are built by and belong to the communities they serve, and their primary purpose is to deliver electricity to their members.
Co-ops are led by members from the community and are well-suited to meet local needs. Members are not just customers but owners of the business. They have equal status and influence and participate in policymaking. Co-ops are service-based and focused on the community rather than on sales objectives.
Co-ops function democratically, with members voting to elect a board of directors that hires and oversees a management team responsible for day-to-day operations. Members vote on operational matters such as rate increases, infrastructure investment, and budget surplus spending. This democratic process allows members to have a say in how the co-op is run and ensures that the co-op serves the best interests of its members.
For example, co-ops may reinvest revenues into infrastructure or distribute them to members in the form of capital credits or patronage refunds. This is in contrast to investor-owned utilities, where profits go to shareholders.
Co-ops are governed by democratically elected boards of directors, and members can be nominated to these board positions and voted on annually by the entire membership. This gives consumer-members an influential voice in their electric service and helps keep rates low.
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Co-ops are transitioning to clean energy
Electric cooperatives, or co-ops, are unique business models that are distinct from other utility providers. They are owned by their members, who are also the consumers of the organisation's energy. Members can be individuals, workers, or businesses. Electric co-ops are built by and belong to the communities they serve, and they are led by members of these communities.
Co-ops are also investing in battery storage technologies to address intermittency and improve reliability. They are exploring all options, fuels, and technologies to meet their consumers' evolving energy needs. For instance, co-ops are investing in natural gas projects, geothermal energy storage, and nuclear power plants.
There are several models of renewable energy cooperatives: Local Group of Citizens, Regional-National RE co-ops, Fully Integrated RE co-ops, Network of RE co-ops, Multi-Stakeholder Governance Model, and Non-Energy-Focused Organisations. The Local Group of Citizens model is very small and localized, with members as the only investors. Regional-National cooperatives operate at a larger scale and are financed by both members and investors. Fully Integrated co-ops strive for energy independence from large, company-dominated markets, while Networks of RE co-ops work to improve the operation and balance of time, resources, and economy through education and rules.
The transition to clean energy brings cost savings and economic growth to co-op communities. It also reduces emissions, with co-ops using 145% more renewable energy since 2010. This shift to renewable energy sources also helps to stabilize energy prices and supports equal access to energy.
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They provide electricity to 42 million people in the US
Electric cooperatives, or co-ops, are not-for-profit businesses owned and controlled by the people who use their services. They are unique in their history and business model, setting them apart from other utility providers. Electric co-ops began operating in the United States around 75 years ago when rural residents struggled to access electric power. With the help of federal loans, these residents formed their own electric cooperatives to generate, transmit, and deliver electricity to their homes, schools, farms, and businesses.
Today, electric co-ops provide electricity to 42 million people in the United States, serving over 90% of counties classified as "persistently impoverished." They power over 22 million businesses, homes, schools, and farms in 48 states, and they return more than $1 billion to their consumer-members annually. Electric co-ops are led by members from the community and are well-suited to meet local needs. They make decisions on how best to meet demand based on the unique needs of their local communities.
Electric co-ops are also leading the way in the transition to clean energy. They have drastically reduced emissions over the years by switching to natural gas and renewable energy sources. Since 2005, co-ops have reduced carbon dioxide emissions by 17% to 23%, sulfur dioxide emissions by 82% to 86%, and nitrogen oxide emissions by 68% to 73%.
Co-ops are investing in battery storage technologies to address intermittency and improve reliability. They are also exploring all options, fuels, and technologies to meet their consumers' evolving energy needs. For example, San Miguel Electric Cooperative in Texas is developing first-of-its-kind geothermal energy storage, while Dairyland Power Cooperative in Wisconsin has implemented a transmission line to reduce grid congestion and improve system flexibility.
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Frequently asked questions
An electric cooperative, or co-op, is a private, non-profit company that delivers electricity to its customers or members. Electric co-ops are owned and operated by their members, who are also the organisation's energy customers.
Electric co-ops function democratically, with members voting to elect a board of directors that hires and oversees a management team responsible for day-to-day operations. Co-ops make decisions on how best to meet demand based on the needs of their local communities.
Members of electric co-ops are not just customers but owners. They have equal status and influence, participate in policymaking, and work together to improve sustainability and the good of their community. Electric co-ops are service-based, not profit-based, and exist solely for the purpose of serving their communities.
