Rural Electric Co-ops 101
In the 1930’s, only 10 percent of people living in rural areas had access to electricity, compared to 90 percent of city dwellers. Utility companies were reluctant to extend their service territory to rural areas, which stunted economic growth in rural areas and did not allow rural people access to modern conveniences. Steve Keillor, in his book, Cooperative Commonwealth: Co-Ops In Rural Minnesota 1859-1939, explains that:
“Few farmers could afford (fees to cover line construction) or their high rural rates – nine to ten cents per kilowatt hour when urban rates were charged four to five cents. A Catch-22 blocked progress: ‘recipients of service used little power because of high rates, and utilities charged such rates because of low usage.’ Utility firms expected farmers to solve this problem by buying more appliances and increasing their usage so that the companies could lower the rates. Farmers wanted the utilities to lower the rates so that they could afford to buy appliances and increase their usage.”
Expansion of electric service to rural areas was further delayed by the compound effects of the Dust Bowl and the Great Depression.
During his first term President Franklin D. Roosevelt began the New Deal, a series of programs designed to bring relief to the American people. As a part of the New Deal Roosevelt’s administration sought to bring electricity to rural areas. In 1935 the Rural Electric Administration was created by Executive Order, and the following year the Rural Electrification Act was passed as means to tackle rural development as well as national unemployment. The Rural Electrification Act designated funding for loans to be made available for electric distribution entities across the countryside. The organizations that rose out of the Rural Electrification Act were member-owned and democratically-controlled cooperatives.
Cooperatives do business in a radically different way than corporations. Cooperatives are an independent association of people united voluntarily to meet their common economic, social, and cultural needs and goal through a jointly owned and democratically controlled enterprise. Unlike companies where the executives call the shots, co-op member owners elect leadership in the co-op who carry out the wishes of their member owners.
Central to the operations of any cooperative are the the principles of the cooperative business model.
- Voluntary and Open Membership
Cooperatives are voluntary organizations open to all person able to use their services and willing to accept the responsibilities of membership, without gender, social, racial, political, or religious discrimination - 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. - 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. - 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. - Education, Training, and Information
Cooperatives provide education and training for their members, elected representatives, managers, and employees so that they can contribute effectively to the development of the cooperatives. They inform the general public, particularly young people and opinion leaders, about the nature and benefits of cooperation. - Cooperation Among Cooperatives
Cooperatives serve their members most effectively and strengthen the cooperative movement by working together through local, national, regional, and international structures. - Concern for Community
While focusing on member needs, cooperatives work for the sustainable development of their communities through policies accepted by their members.
Since the Rural Electrification Act, electric cooperatives have transformed into utility giants, covering 75% of the United States’ Landmass and operating 2.6 million miles of electric lines. There are 840 local distribution co-ops, which distribute electricity directly to their members, and 65 Generation and Transmission Co-ops (G&T’s), which generate electricity for distribution co-ops. G&T’s are the sixth cooperative principle in action, as they are owned and governed by distribution cooperatives who have pooled resources to provide power to their member owners.