Electric cooperatives are:
- Private independent electric utility businesses,
- Incorporated under the laws of the states in which they operate,
- Established to provide at-cost electric service,
- Owned by the consumers they serve,
- Governed by a board of directors elected from the membership, which sets policies
and procedures that are implemented by the cooperatives' professional staff.
Most electric co-ops are distribution cooperatives that deliver electricity to the
consumer. Some are generation and transmission cooperatives that both generate and
transmit electricity to meet the power needs of distribution co-ops.
How Your Electric Co-op Works
(image courtesy of Iowa Association of Electric Cooperatives, 100 Kb)
What Makes Cooperatives Different?
Cooperatives are operated to provide at-cost electric service to the consumer-owners.
On the other hand, investor-owned utilities that are not co-ops are operated to
maximize profit for the shareholders. A co-op's net margin above expenses and reserves
does not belong to the utility; it belongs to the individual consumer-owners of
the co-op. The margins must either be used to improve or maintain operations, or
be distributed to those who use the co-op's products or services.
Cooperative Principles
All cooperative businesses adhere to 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.