Cooperatives formed and owned by the consumers they serve

What is a cooperative?

Member-owned and member-governed, cooperatives are formed by consumers to provide a service or product at the lowest cost.

• Electric cooperatives are private independent electric utility businesses; owned by the consumers they serve; incorporated under the laws of the states in which they operate; established to provide at-cost electric service; and governed by a board of directors elected from the membership, which sets policies and procedures that are implemented by the cooperatives' professional staff.
• Distribution cooperatives deliver electricity to the consumer. Generation and transmission cooperatives (G&Ts) generate and transmit electricity to distribution cooperatives.
• In addition to electric service, many electric cooperatives are involved in community development and revitalization projects, e.g., small business development and jobs creation, improvement of water and sewer systems, and assistance in delivery of health care and educational services.

What differentiates cooperatives from privately owned businesses?

Cooperative businesses are special because they are owned by the consumers they serve and because they are guided by a set of seven principles that reflect the best interests of those consumers.

More than 100 million people are members of 47,000 U.S. cooperatives, enabling consumers to secure a wide array of goods and services such as health care, insurance, housing, food, heating fuel, hardware, credit unions, child care or utility service.

All cooperative businesses adhere to these seven guiding principles:

1. 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.
2. 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.
3. 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.
4. 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.
5. 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.
6. Cooperation among cooperatives - Cooperatives serve their members most effectively and strengthen the cooperative movement by working together through local, national, regional and international structures.
7. Concern for community - While focusing on member needs, cooperatives work for the sustainable development of their communities through policies accepted by their members.

National facts about electric cooperatives:

In the United States, 864 distribution and 67 G&T cooperatives serve:

• 37 million people in 47 states
• 16 million businesses, homes, schools, churches, farms, irrigation systems and other establishments in 2,500 of 3,141 counties in the U.S.
• 12 percent of the nation's population

To perform their mission, electric cooperatives:

• own assets worth $86 billion
• own and maintain 2.4 million miles, or 43 percent, of the nation's electric distribution lines, covering three quarters of the nation's landmass
• deliver 10 percent of the total kilowatt-hours sold in the U.S. each year
• generate 5 percent of the total electricity produced in the U.S. each year
• employ 63,000 people in the United States
• retire more than $450 million in capital credits annually
• pay more than $1 billion in state and local taxes

Compared with other electric utilities:

• Co-ops serve an average of 6.6 consumers per mile of line and collect annual revenue of approximately $8,500 per mile of line
• Investor-owned utilities average 34 customers per mile of line and collect $59,000 per mile of line,
• Publicly owned utilities, or municipals, average 44 consumers and collect $72,000 per mile of line.

For more information about electric cooperatives, go to www.nreca.org.

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