Controlling Cost at Your Cooperative

Electric co-ops were formed to bring electricity to rural areas of the country that were not economical for investor owned utilities to serve.  This still holds true today, IOUs (Investor Owned Utility) and municipal utilities serve, for the most part, high density areas, whereas co-ops serve the sparsely populated areas. 

Today, when people talk about rates, they try to compare the co-op rates to IOU rates and wonder why their electric bill is higher than their friends that live in a city.  It all boils down to the economy of scale.  An IOU can have several houses connected to one transformer because the houses are close together.  In the co-op world, in most cases there is one transformer to one house.  Let’s say that a transformer goes bad and it costs $2,000 to buy and replace that transformer; an IOU that has five houses connected to that transformer can spread that $2,000 cost over the five households to recover the cost.  In the same situation for a co-op, the co-op only has one household to recoup that same $2,000.  For a lot of our members, if there were five houses to one transformer they would start to think about moving because the neighbors are just too close.  

Being a member of a co-op definitely has its advantages.  The co-op’s margins (profit) belong to its members, who are the owners of the co-op.  These margins are paid back to its owners (you) on a twenty-year cycle.  What this means is that if you were a member 20 years ago and the co-op made a margin that year, you will get your share of those margins back.  These are called Capital Credits.  If you were a customer of an IOU 20 years ago those profits are long gone and you didn’t get any of the profits unless you owned stock in that IOU.  If you purchase power from a municipal utility and it generates profits the cash offsets other municipal operations.

Another benefit of being a co-op member is that you have a say in how your company is run by voting for a director to represent you and your interests in the co-op. Directors have a very important job.  They must represent the members in their district and they must do what is right for the good of the whole. Keeping rates in line is discussed at every board meeting.

Electric cooperatives of today face extraordinary challenges.  Boards and managers must address the potential impacts of wholesale rate increases, the emergence of new technologies, the growth of member demands for service and whether they wish to offer diversified services.  At the same time they need to address new issues, while continuing to provide competitively priced electric service and maintaining the loyalty and support of their members.

Your cooperative is operating in the conservation mode too.  We are working to find ways to save money and manage expected rate increases.  Arrowhead’s directors and employees are planning for the future and being proactive in their approach through budgeting, strategic planning sessions and listening to you and your needs.

We are all in this together, building on our foundation for a better future – dedicated to serving your best interests.

Comments are closed.