Is Electric Cooperative Different Than a Utility?

If you are a city dweller, you might never have even heard the term electric cooperative. However, for those living in the rural areas of the U.S., cooperatives have long represented the only option to get access to reliable, affordable electricity. Still today, electricity cooperatives supply electricity to many homes and businesses within America. Let’s take a closer look at how they work.

Electric Cooperative: What is it?

An electric cooperative is a privately-owned, non-profit company that delivers electricity to its members. Why members and not customers?

That’s because everyone who receives electric service from a cooperative automatically becomes its member. This means that you get to participate in the democratic process of running the cooperative in exchange for a regular membership payment – a ‘patronage’. All revenue that gets generated by the cooperative is reinvested back in the community – and you as the member get to decide how it’s spent.

History of Electric Cooperatives

It’s hard to imagine households using lanterns, candles, and wood-burning stoves to see in the dark and cook food. Such was the state of access to electric power in rural areas before 1935. That’s when President Franklin D. Roosevelt established the Rural Electrification Administration (REA), allowing rural communities to form electric cooperatives and guaranteed access to reliable electricity to everyone.

Electric Cooperatives in Texas

There are many electricity cooperatives in Texas. Cooperatives around the world adhere to the Seven Cooperative Principles, dating all the way back to 1840. The fact that these principles are still followed in the modern world is a testament to the power of the electric cooperative model.

Voluntary and Open Membership
Democratic Member Control
Members’ Economic Participation
Autonomy and Independence
Education, Training, and Information
Cooperation Among Cooperatives
Concern for Community

What do these principles mean in practice? That electric cooperatives are independent, democratic, and self-organized organizations with full autonomy over their operations. If they decide to raise funds by entering into an agreement with another group, it’s only if all members express support of such a decision.

It contrasts greatly with the operating model of traditional electric power companies, where you, the customer often have only marginal visibility into how revenues, collected from your electric bills are spent.

Advantages of Electric Cooperative

If you are fed up with traditional private utilities, where the consumer doesn’t have much say and whose decisions are dictated by profit, you might consider membership in an electric cooperative. What are some of the benefits?

You Are Considered an Owner

Members of the cooperative are essentially part-owners of the company. You essentially sit on the cooperative’s board and you participate in key decisions about how money gets invested, what rates are charged, and how capital gets raised.

Service Focused

The cooperatives’ mission is tightly focused on providing service to its members, not around generating profit.

Community Focused

True to its seventh principle, Concern for Community, cooperatives work for the sustainable development of their communities through policies and activities accepted by their members. This can involve upgrading existing infrastructure or investing in creating stable rates.

Provide Capital Credits

Electric Cooperatives return their revenues or margins to cooperative members in the form of capital credits. For example, Claverack Rural Electric Cooperative returned $1.7 million to its members last year.

Allow Members to Vote in Board Member Elections

Cooperatives follow democratic processes and allow each of their members to vote in board member elections, participate in policymaking and influence the company in sharing their ideas and concerns.

Texas Electric Cooperatives (TEC)

To amplify their bargaining power, many cooperatives joined together under Texas Electric Cooperatives (TEC). The TEC was born in 1941 with the purpose to power communities and empower members to improve the quality of their lives. Today, it represents some of the biggest electric cooperatives in Texan rural areas.

Today, the Austin-based TEC represents the interests of 64 distribution and 11 generation and transmission cooperatives, some of the largest ones being:

You can see the full list of cooperatives associated with TEC on the organization’s website.

TEC Business Alliance Program

To acquire relevant services for its members and further empower the Texas community, TEC runs a Business Alliance Program for individuals, businesses, and organizations who want to cooperate with the electric cooperative decision-makers.

In exchange for services in specific areas such as engineering, human resources, accounting, member services, and loss control, the affiliated professionals and businesses can access a range of program benefits, including:

Opportunities to attend all TEC conferences and exhibit shows
Member-discounted registration fees for all TEC conferences, workshops, and webinars
Member recognition at TEC conferences and meetings
Discounted advertising in the annual TEC Directory
Access to TEC training opportunities, free subscriptions, and other member discounts

Utilities Vs. Electric Cooperatives

If you are still a bit confused about what is an electric cooperative and what a utility company, below are the most important distinctions.

Profit Vs. Service

Cooperatives’ main focus is on community cooperation and development, while the primary driver for private utility companies is, you guessed it, profit. Because an electric cooperative is nonprofit, any unused revenues are returned back to its members, in a form of capital credits.

Member-Owners Vs. Customer

As a member, you pay into the cooperative to receive electric service. In turn, you are considered a part-owner of the cooperative and as such, involved in the decision-making process. As a customer or a traditional, regulated utility, you get electricity in exchange for regular payment, but you have no say in the management of the company.

Democratic Process Vs. Board

Utility companies are owned by the company’s investors. A board of directors makes all the decisions about the day-to-day running of the company. An electric cooperative is run by its members. If you buy into the cooperative, you earned the right to vote in elections, participate in policymaking and influence the company’s future.

Electric Cooperatives and Energy Deregulation

Do members of a Texas cooperative have access to the deregulated energy market? They might. Today, over 85% of Texas territory is deregulated (with only a few exceptions, like Austin, San Antonio, and El Paso). Some cooperatives allow their members to shop for electricity plans, just like the customers of other electric utilities can. If your cooperative allows electricity choice – it will notify you of your rights in your bill.

FAQs

What are electric cooperatives?

An electric cooperative is a privately-owned company that delivers electricity to a rural community. As a member, you get to participate in the democratic process of running the cooperative in exchange for a regular membership payment – a ‘patronage’. These organizations are characterized by their strong focus on development and support for the areas they serve. Many electric cooperatives organize together to increase their influence and scope of services.

In the past, electric cooperatives were the only option for customers in rural areas in the U.S. to access reliable electricity. Today, their business model remains strong and provides tough competition to traditional electric suppliers in cities. If you are intrigued by having a say in how the company that delivers your power is run and being a part of a community with a joint purpose, it might be something to consider.

Updated on 10-12-21