CEO Note - October is Cooperative Month

Each year October is dedicated to recognizing cooperatives across the country. In the time I have spent working in the cooperative world I have had the opportunity to speak with many of our members. Through those conversations I have found a distinct gap in knowledge about what a cooperative is, why they exist, and how they differ from other entities in the electric business today. Folks that were around when the cooperative business model was initiated, or grew up in households with parents who were, have a very firm grasp on the services their cooperative provides. Folks who weren’t around at that time struggle to understand the difference.

This year at the annual meeting someone asked a question about utility boundaries and why they didn’t get to choose what utility serves them. I stopped for a moment and pondered out loud where to start with that answer. In the end, I talked very briefly about how the territorial boundaries have come to exist over the years and the fact that people in rural areas where once denied the opportunity to improve their standard of living as companies had the right to deny electric service.

Cooperatives were born out of this concern. Before there were regulatory bodies and laws that prohibited this type of discrimination, electric companies routinely denied service to individuals in rural areas. While engineering concerns existed with the transportation of voltages used in urban areas at that time over great distances, they did so primarily based on profitability. If a person lived several miles out of town and wanted electric service those companies would take into consideration the investment it would take to build out their infrastructure. If they conducted the financial analysis and found the return on that investment to be unsatisfactory that person would be denied service. The Rural Electrification Act of 1936 changed all this. It allowed people living in rural areas to come together and form cooperatives to build their own distribution system and purchase wholesale power. Each member would share in the costs to provide the infrastructure and then pay for the electricity they used. This is the foundation of the cooperative business model that still exists today.

While urban sprawl has blurred the lines between what was once considered rural, and there are many more laws and regulatory bodies governing the electric industry, investor owned utilities (for profit) and cooperatives (not for profit) still face the same financial issues today. In a nutshell, investor owned utilities are in business to make a profit and increase earnings per share for their shareholders. Cooperatives actually operate in the exact opposite manner. The goal is to hold down cost and deliver services to the membership in the most reliable and economically feasible manner.

In conversations with members I have found people want to compare the rates and or associated costs of the two entities and often argue the above statement is not true. The piece that is continually overlooked in these conversations is the undisputable economic reality. When it comes to the equipment associated with an electric distribution system and the delivery of power, it is simply more expensive to serve the rural community. This was the basis for the statement I made in my answer at the annual meeting. There was a time when the people that came together to form the cooperative were simply deemed “not profitable” and of no value to those “for profit” entities. While I understand this mindset in the financial sense, I have found our members to be of great value to the business.

Our members own and help govern our business. Our board of directors is elected by and from the membership. The Board is there to represent you and they need to know of any concerns so they can do so in the most informed fashion. Our members provide feedback that helps the board and the cooperative staff assign priorities and align policies that meet the needs of the vast majority of the membership. Our board members take their jobs very seriously and I continue to be impressed with the time and effort they put into the decision making process to make sure they are weighing the interest of the total membership. So, as I always say, get involved. Let us know what is on your mind. I can’t promise we can fix ever issue or that we will be able to satisfy every single member. That’s just not realistic. That’s just life. However, I would urge you to contact me or any of our board members with your thoughts. You can send any of us an email through our web site at www.tipmont.org. I look forward to serving you all in the upcoming year.