Trystan Casey
Electric cooperatives, or co-ops, are nonprofit organizations that are owned and governed by their members or customers. They were created to bring electricity to rural areas that were not served by investor-owned utilities, which believed that there would be insufficient revenue to justify the capital expenditures required. Electric co-ops are present in many countries, including the United States, the United Kingdom, France, and the Philippines. In the US, they are governed by an elected board of directors and have several advantages over investor-owned power suppliers, such as distributing profits to members in the form of capital credits and having a focus on service and community rather than sales objectives and return on investment.
| Characteristics | Values |
|---|---|
| Type of cooperative | Utility cooperative |
| Definition | A type of cooperative that is tasked with the delivery of a public utility such as electricity, water or telecommunications to its members |
| Ownership | Each customer is a member and owner of the business |
| Authority | All members have equal individual authority |
| Decision-making | Democratically, with members voting to elect a board of directors that hires and oversees a management team |
| Profit | Not-for-profit |
| Profit distribution | Reinvested for infrastructure or distributed to members in the form of "patronage" or "capital credits" |
| Examples | Tri-County Electric Cooperative, Co-operative Energy (UK), Enercoop (France) |
| Oversight | In the Philippines, electric cooperatives are overseen by the government through the National Electrification Administration (NEA) |
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What You'll Learn
- Electric cooperatives in the Philippines are overseen by the government through the National Electrification Administration (NEA)
- Cooperatives are service-based, not profit-based
- Electric cooperatives in the US are governed by an elected board of directors
- Electric cooperatives are leading the way in cutting their carbon footprints
- Electric cooperatives are a product of Franklin D. Roosevelt's New Deal
Electric cooperatives in the Philippines are overseen by the government through the National Electrification Administration (NEA)
Electric cooperatives are typically non-profit organizations owned by their members or customers. They are formed to meet the needs of their members, which for-profit power companies were not fulfilling. They are focused on serving their members and improving the communities they operate in, rather than chasing returns for shareholders. As a result, electric cooperatives are able to use their resources for valuable service-related improvements and consumer education.
Electric cooperatives emerged in the United States in the early 1900s due to Franklin D. Roosevelt's New Deal. At the time, utility companies believed that providing power lines to rural areas would not be profitable. As a result, farmer-based cooperatives were formed, and they applied for federal loans to make rural electrification a reality. Today, electric cooperatives in the United States power over 20 million businesses, homes, and schools, serving reliable electricity to more than 42 million people daily.
Electric cooperatives are governed by an elected board of directors, and they function through democratic means. Members have equal status and influence, and they can participate in policymaking and work together to improve sustainability and the good of their community.
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Cooperatives are service-based, not profit-based
Electric cooperatives are non-profit, service-based organisations owned and governed by their members or customers. They are focused on delivering electricity to their members and improving the lives of those in their communities.
Cooperatives are fundamentally different from traditional businesses. Each member has an equal say in how the cooperative is run, regardless of their investment. This is in contrast to investor-owned utilities, where the extent of individual authority is determined by the number of shares held. Electric cooperatives are also known as co-ops, and they are democratically controlled by their members, who are both owners and customers.
The cooperative model is particularly prevalent in rural areas of the United States, where they were established to bring power and telephone services to communities that were ignored by investor-owned utilities. In the early 20th century, power companies saw little economic advantage in servicing these rural areas, so cooperatives were formed to fill this gap. Today, electric cooperatives power over 20 million businesses, homes, and schools, serving reliable electricity to 42 million people daily.
While cooperatives are service-based, they do still aim to earn profits. These profits are either reinvested in infrastructure or distributed to members as dividends. This is a form of "profit-sharing" or "surplus-sharing", which has existed in the Anglosphere since 1795.
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Electric cooperatives in the US are governed by an elected board of directors
The election process for the board of directors involves members voting to elect their representatives, who then hire and oversee a management team responsible for day-to-day operations. This democratic structure ensures that members have a voice and influence in the cooperative's decision-making, promoting community-focused goals.
The history of electric cooperatives in the US can be traced back to Franklin D. Roosevelt's New Deal in the early 1900s. At that time, utility companies believed that providing power lines to rural areas would not be profitable, leaving these regions without access to electricity. The Rural Electrification Act of 1935 or 1936 addressed this issue by providing federal funds and establishing the Rural Electrification Administration (REA) to initiate a lending program for farmer-based electric cooperatives. This led to the electrification of over 90% of US farms by 1953.
Today, electric cooperatives in the US serve over 20 million businesses, homes, and schools, powering approximately 42 million people daily. They are committed to providing reliable electricity to their members and have added over 1.3 gigawatts of new renewable capacity in recent years. Electric cooperatives have also scored higher in customer satisfaction compared to investor-owned utilities, demonstrating their focus on serving their members' needs.
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Electric cooperatives are leading the way in cutting their carbon footprints
Electric cooperatives are private, nonprofit organizations owned by their members or customers. Electric cooperatives (or co-ops) are an alternative to commercial utility companies and are governed by an elected board of directors. Each customer is a member and owner of the business, and all members have equal individual authority.
Co-ops are service-based and community-focused, rather than profit-based. They are led by members from the community and are uniquely suited to meet local needs. They are committed to providing reliable electricity to rural communities that are often ignored by investor-owned firms.
Co-ops are also working to secure their infrastructure from cyber-attacks and have installed smart meters across 81% of their customer base. In addition, co-ops are investing in energy innovation to help meet future energy needs. They are reducing emissions through a combination of emission-reduction measures and switching to natural gas and renewables. For example, co-ops added over 1.3 gigawatts of new renewable capacity in 2023, and wind farms and solar arrays generate enough electricity to power more than 3.5 million homes.
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Electric cooperatives are a product of Franklin D. Roosevelt's New Deal
On May 11, 1935, Roosevelt signed Executive Order No. 7037, establishing the Rural Electrification Administration (REA). The following year, Congress began funding the REA as a major provision of the New Deal, aiming to lift the country out of economic depression. The REA's lending program provided funds for farmer-based cooperatives to build lines and provide electric service on a not-for-profit basis. This marked the beginning of electric cooperatives in the United States.
The establishment of the REA was followed by the passing of the Rural Electrification Act in 1936, which further facilitated the work of electric cooperatives. The REA also drafted the Electric Cooperative Corporation Act in 1937, enabling states to form and operate not-for-profit, consumer-owned electric cooperatives. As a result of these initiatives, more than 90% of U.S. farms had electricity by 1953, and today, about 99% of the nation's farms have electric service.
Electric cooperatives are owned and governed by their members, who are typically the customers of the cooperative. This democratic structure ensures that all members have equal authority and influence, regardless of their investment. Profits are either reinvested in infrastructure or distributed to members as dividends. Electric cooperatives have empowered rural communities, providing reliable electricity to over 20 million businesses, homes, and schools. They have played a crucial role in bridging the urban-rural divide and improving the lives of millions of Americans.
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Frequently asked questions
In the US, electric cooperatives are overseen by the Rural Utilities Service (RUS), formerly known as the Rural Electrification Administration (REA). The REA was established in 1935 by President Roosevelt to provide federal funds for rural electrification.
Yes, there are two types of electric cooperatives: distribution cooperatives and generation and transmission (G&T) cooperatives.
Distribution cooperatives serve end-users such as residences and businesses, who are also their members.
Generation and transmission cooperatives sell wholesale power to distribution cooperatives and are owned by their member cooperatives.
Cooperatives are owned and controlled by their members, who have equal authority and influence. They are not-for-profit organisations that reinvest profits into infrastructure or distribute them to members as dividends or "capital credits".
