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Cooperative Energy

Finance

Financial institutions

Financing for customer-members

See links in notable_organizations.

Bibliography

  • National Conference of State Legislatures, “On-Bill Financing: Cost-free Energy Efficiency Improvements.” April 7, 2015.
    • State by state listing of legislation around on-bill financing, as well as the co-ops and other companies practicing it.
  • Vanvig, John. “On-Bill Financing: The Ins and Outs of Providing Consumer Loans for Efficiency Upgrades.” Rural Electric Magazine. July 20, 2016.
    • “more than 100 co-ops around the country help their members break the cost barrier with on-bill financing (OBF) programs, in effect lending the consumer enough money to pay for home or business energy efficiency improvements and recovering the loan amount through the monthly electric bill. Most co-op OBF programs are aimed at efficiency measures like home weatherization or heat pumps, but at least three co-ops provide financing for rooftop solar”
    • “With more third parties than ever before offering energy services, a solid OBF program can help a co-op maintain its role of trusted energy advisor”
    • Explores the difference between on-bill loans and tarrifs. Here the distinctions are made even more clearly.
    • Pay As You Save (PAYS) as another way of presenting on-bill financing options, advocated by Holmes Hummel's Clean Energy Works.
    • “Electric cooperatives have been by far the leaders in this innovation and the reason for that is the alignment they have between shareholder interests and customer interests,” said Hummel. “Electric co-ops are, frankly, more nimble. They’re relatively efficient organizations.” / “This is a repeatable transaction map,” Hummel said. And as opposed to a loan or lien program, the PAYS model doubles the addressable market and increases the size of projects customers are willing to take on.
    • “The PAYS model is being rolled out to rural co-ops first, with the intention and hope that it will ultimately be picked up by IOUs as well,” says a source.
    • “Curtis Wynn, president and CEO of Roanoke Electric Cooperative, said his member-owned organization is doing 200 home upgrades per year using the PAYS model, and anticipates an initial run of five years — ultimately, about 7% of the homes in the territory.”

Notable organizations

Delta-Montrose Case

Timeline

Policy and lobbying

History

  • 1902: Public & nonprofit utilities gain preference for generation projects on federal land (Doyle 1979, 17-18)
  • 1933: First TVA-based co-op created in Rep. John Rankin's district in Mississippi (Doyle 1979, 7)
  • 1935: Franklin Roosevelt created the Rural Electrification Administration by executive order
  • 1936: Congress passed the Rural Electrification Act with support of John Rankin, Sam Rayburn, George Norris (Doyle 1979, 4-5)
  • Truman supported co-ops and was a close ally (Case 2013, 27-29)
  • Eisenhower opposed co-ops, saw them as creeping socialism (Doyle 1979, 8)
    • Gallant, Frank K. ”President Eisenhower and the REA: The Honeymoon Was Over.“ Rural Electric Magazine. April 1, 2016.
      • Sec of Ag Ezra Taft Benson made REA much more cautious, required co-ops to form partnerships with IOUs
      • In 1956, the new Sec of Ag, a Colorado rancher named Dave Hamil, protected the REA from the hostile Eisenhower administration of which he was part.
  • 1960: Co-ops supported Kennedy against Nixon (Doyle 1979, 9)
  • 1964: Co-ops supported Johnson against Goldwater, a fierce opponent (Doyle 1979, 10)
    • Johnson helped create the co-op that served his Texas ranch, Pedernales (Doyle 1979, 7)
  • 1969: Under a less supportive Nixon administration, National Rural Utilities Cooperative Finance Corporation (CFC) founded through capital markets
  • 1972: Under Nixon, the USDA interest rates increased from 2% to 5% “Black Friday,” Dec. 29, 1972 (Doyle 1979, 11), but he reinstated the program in 1973
  • Ford
  • Carter
    • Gallant, Frank. ”Flashbacks: The Day President Carter Won Back the Co-ops.“ Rural Electric Magazine. October 8, 2015.
      • “Jimmy Carter has a connection to electric co-ops that few other American presidents can match. His father had been a director of Sumter EMC in Americus, Ga., not far from the family farm in Plains, and Carter himself was still a member of the co-op while he was president.”
  • Reagan
  • Bush I
  • Clinton
    • 1993: In his State of the Union address, President Clinton singled out the Rural Electrification Administration for budget cutting. Taken by surprise, the NRECA and legislators worked hard to produce a bill that reduced the cost of the REA loan program.
      • Gallant, Frank. K. ”State of the Union Shocks Co-op Leaders.“ Rural Electric Magazine. July 2, 2015.
        • Clinton: “I recommend that we reduce interest subsidies to the Rural Electrification Administration. That’s a difficult thing for me to recommend. But I think that I cannot exempt the things that exist in my state or my experience if I ask you to deal with things that are difficult for you to deal with. We’re going to have no sacred cows except the fundamental abiding interest of the American people.”
        • “On November 1, Clinton signed the Rural Electrification Loan Restructuring Act. The Post pointed out that the president had made good on his no-sacred-cows promise.”—”The 2 percent loans were abolished, and new 5 percent loans would be available to the co-ops serving the poorest and most sparsely settled areas, Case explains in his book. The changes also allowed co-ops to play a broader role in rural development.“
    • 1993: Passed Rural Electrification Loan Restructuring Act
    • 1994: REA absorbed into Rural Utilities Service (RUS) in Department of Agriculture Reorganization Act
  • Bush II
    • His ranch gets its electricity entirely from the Heart of Texas Electric Co-operative Inc, founded in 1937
  • Obama
    • Rural broadband
    • 2014: President Obama unveiled a major solar energy initiative and noted the work that electric cooperatives across the country were doing to develop community solar projects and solar options for their members

2016 U.S. election

    • Total spent: $1,699,950 in federal races (28% to Democrats, 72% to Republicans)
    • The proportion given to Republicans has been on the rise. It was 50/50 in 2010, and more or less consistently so since 1998 (when, for instance 53% went to Democrats)
  • Barber, Wayne. ”NRECA hoping the Clean Power Plan will go away.“ GenerationHub. November 17, 2016.
    • “Matheson said NRECA has been working for a year to build relationships with both major presidential candidates. That said, NRECA opposed the Clean Power Plan, as a regulatory 'overreach,' Matheson said. NRECA is encouraged by President-elect Donald Trump’s public opposition to the Clean Power Plan.”
  • Cash, Cathy. ”‘Co-ops Vote’ Called a Success.“ Electric.coop. November 14, 2016.
    • “We really do feel quite confident that our Co-ops Vote program had significant impact on voter turnout,” said Matheson. “Rural America’s voice was heard in this election and it will be a powerful voice moving forward.”
    • This mandate, Matheson said, “gives us an important platform to talk about the Clean Power Plan and its impact on our members”
  • Coop Voters Made a Difference in the Election.“ Arizona G&T Cooperatives. November 23, 2016.
    • “Increased turnout on the part of rural voters is emerging as one of the factors that may have helped Donald Trump win the presidential election, as election officials across the nation continue to analyze polling place returns and other data. / Phil Bashaw, director of government relations and grassroots advocacy at the Grand Canyon State Electric Cooperative Association (GCSECA), said rural voters reversed a trend that was seen in 2012.”
    • Bashaw: “We had a lot at stake, not just in the presidential election, but with every Congressional, state legislative, and local race as well – and we were overwhelmingly successful in seeing those candidates elected who supported our positions on especially onerous regulations like the Clean Power Plan”
  • Johnson, Steven. ”Mike Pence Familiar to Indiana Co-ops.“ Electric.coop. July 25, 2016.
    • “After his 2012 election as governor, Pence backed a 2015 bill sought by electric cooperatives and Indiana’s investor-owned utilities that preserved their existing service territories, preventing annexation of service territory by the state’s municipal electrics.”
    • “He spoke at the 2013 statewide annual meeting in Indiana and met with co-op leaders about their concerns with the Environmental Protection Agency’s Clean Power Plan. / Pence later signed on to the action.coop program, urging the agency to consider a balanced energy policy.”
    • “His wife Karen has been an active supporter of the annual Electric Consumer student art calendar contest and has spoken at receptions for the contest winners.”
    • In comparison, there are no mentions of “Clinton” or “Kaine” according to a search of Electric.coop.
  • NRECA statements on election and nominations: Trump, Pruitt, Zinke, Perry, Perdue
    • On Purdue: “Gov. Perdue has always been a strong advocate for electric cooperatives in Georgia, and he is a great choice to lead the Department of Agriculture,” said Dennis Chastain, president and CEO of Georgia EMC. “He is a multi-generational member of Flint Energies, a distribution cooperative serving middle Georgia. Throughout his time in office, he has consistently engaged the electric cooperatives in policy deliberations and always took the time to understand our issues. Electric cooperatives look forward to continuing to be a trusted source of information for Gov. Perdue in his new role.”
  • Nussle, Jim and Jim Matheson [CEO of NRECA]. ”New president, new Congress, new opportunity.“ The Hill. December 7, 2016.
    • “In our roles now as leaders of the trade associations representing the nation’s credit unions and electric cooperatives, we need a Congress that can come together to pass meaningful legislation to address some of the most pressing issues facing the country.”
    • “For credit unions, reform of the Consumer Financial Protection Bureau is high on our list of priorities necessary to break a one-size-fits-all regulatory scheme that has made it more difficult and more expensive for credit union members to access much-needed credit union services.”
  • Trump, Donald. ”Full Speech: Donald Trump Event in Gaffney, SC (2-18-16).“ Right Side Broadcasting Network. February 18, 2016.
    • After taking the stage, noting “it's a lot of people,” and joining the audience in a chant of his surname his opening words are, “Do we love electricity, by the way, all you electricity people? You guys have been so great. How about life without electricity? Not so good, right, not so good.” Then he goes on to say that if people aren't going to vote for him they shouldn't vote.
    • NRECA. ”Broad River Electric Cooperative Hosts Donald Trump.“ Co-op Rural Power. February 25, 2016. “During his remarks, Trump highlighted the importance of reliable electricity to our communities, and he commended the work done every day by co-op employees.”
  • Voinea, Anca. ”What Will Donald Trump Do for Co-operatives?The Co-operative News. November 10, 2016.
    • “While in Congress and as a governor, Mike Pence met with credit union groups in Indiana and Washington. As governor, he signed a prize-linked savings bill into law, which enabled credit union members to save $1.6m through a Save to Win product. Earlier this year, the governor also appointed the first-ever representative from a credit union to the Indiana Board of Depositories.” / “Mr Pence has received donations from credit union bodies throughout his political career; the Credit Union National Association’s political action committee was the seventh largest contributor to Pence during his congressional career. Since the passing of the reform, both the National Association of Federal Credit Unions and the Credit Union National Association have warned about the costs to credit unions arising, which, they said, faced higher compliance burdens.
    • “On the campaign trail, the president-elect expressed his support for rural energy co-operatives during a speech hosted by South Carolina’s Broad River Electric Co-operative in February. / Ahead of the speech, Mr Trump met with co-op representatives to discuss issues of concern for the sector and highlighted the importance of reliable electricity to communities. He made no clear reference to rural co-ops in his positions, but pledged to repeal the Clean Power Plan and the Waters of the US rules along with other environmental regulations.”
    • “Mr Trump ran for president along with governor Mike Pence, who is a keen supporter of credit unions in his state, Indiana. The governor has also opposed the Dodd-Frank law”
    • “While in Congress and as a governor, Mike Pence met with credit union groups in Indiana and Washington. As governor, he signed a prize-linked savings bill into law, which enabled credit union members to save $1.6m through a Save to Win product. Earlier this year, the governor also appointed the first-ever representative from a credit union to the Indiana Board of Depositories.”
    • “Mr Pence has received donations from credit union bodies throughout his political career; the Credit Union National Association’s political action committee was the seventh largest contributor to Pence during his congressional career. Since the passing of the reform, both the National Association of Federal Credit Unions and the Credit Union National Association have warned about the costs to credit unions arising, which, they said, faced higher compliance burdens.”
    • Paul Hazen on Trump: “To my knowledge he does not have a position on co-operatives.”

Other lobbying

Racial justice

Statistics

Basics of US electric co-ops, via NRECA:

  • 838 distribution co-ops
  • 42 million estimated recipients in 47 states
  • service territories collectively cover 75% of the U.S. landmass
  • own assets worth $164 billion
  • own and maintain 2.6 million miles, or 42%, of the nation’s electric distribution lines
  • deliver 11 percent of the total kilowatt hours sold in the U.S. each year
  • generate nearly 5 percent of the total electricity produced in the U.S. each year
  • employ 72,000 people in the U.S.

Governance

  • According to the ILSR:
    • 72% of co-ops have less than 10% average member-voter turnout
    • especially bad for large co-ops; median turnout is 6.2%

Renewables

Fuel mix data (Vox, eia.gov, NRECA):

Coal Gas Nuclear Hydro Renewables
US average 33% 33% 20% 6% 7%
Co-op G&Ts 71% 16% 10% 1% Oil/Other 1%
Co-op Dist. 54% 18% 14% 10% 4%
  • Cooperative Solar Skyrockets.“ Electric.coop. March 9, 2017.
    • “By the end of 2017, the total solar energy capacity of America’s electric cooperatives will be five times what it was two years ago, according to data released today by the National Rural Electric Cooperative Association.”

Bibliography

  • Aronoff, Kate. ”How to Socialize America’s Energy.“ Dissent. Spring 2016.
    • Explores co-ops as one model for democratizing the energy grid, along with the organizing of We Own It.
  • Calabrese, Andrew. ”The periphery in the center: the information age and the 'good life' in rural America.“ International Communication Gazette 48, no. 105 (1991).
  • Cook, David R., Jr. and Charles T. Autry. Summary of Capital Credits Litigation. Autry, Horton & Cole, 2013?.
    • “The attorneys at Autry, Horton & Cole, LLP created this summary to alert electric cooperatives to the potential risk of these lawsuits so that they m ay take appropriate action to mitigate risks and avoid pitfalls, and, if necessary, defend themselves.”
  • Cooper, Jim. ”Electric Co-operatives: From New Deal to Bad Deal?.“ Harvard Journal on Legislation 45, no. 2 (Summer 2008).
    • “This Essay demonstrates that most distribution co-ops have a financial incentive to sell more electricity, not less. It also shows that co-ops have sought to conceal information from their members—information to which owners are entitled in other business contexts.” (abstract)
    • “Many co-ops are customer-friendly but many are not; some are actively hostile. Legislation should require co-ops to be more efficient, promote conservation, disclose ownership interests to customers, and, for larger co-ops, convert those interests into securities. These reforms could unlock $3 billion to $9 billion of benefits for customers.”
    • “Co-ops acted much like “government agencies” from 1936 to 1973 because they received so many federal tax dollars. Co-ops resembled true “co-operatives” from 1974 to 1984 because they were able to generate sufficient member equity. Finally, co-ops grew more ambitious and began acting like not-for-profit or even for-profit businesses from 1985 to the present.” (353)
    • Due to managerial capture of the governance and election procedures, “Co-op managers and employees have often become the de facto owners of the co-op.” (362)
    • “Reducing either the price or volume of electricity threatens co-op management, however, since managers are motivated to improve the co-op’s top-line revenue, not the member’s bottom line.” (363)
    • Finds that “co-ops are overcapitalized by roughly ten to thirty percent. … Individual co-ops vary but, in the aggregate, co-ops could offer one-time benefits to their owners of three billion to nine billion dollars without endangering co-op financial stability.” (365)
    • “The ability of electric co-ops to obtain virtually unlimited equity from their members, while retaining broad board discretion as to when, if ever, members benefit from their ownership, has given them a government-like power to tax and created co-op balance sheets unlike any others.” (366)
    • Emphasizes, with the NRECA, the need to increase capital credit distributions as a way to reduce costs. Three main policy proposals: promote mergers of co-ops (or munis) to create efficiencies; mandatory disclosures of financials and capital credits to increase transparency, including by “taking co-ops public”; withholding federal support “after seventy years of subsidies” (45)
    • In support of going public: “The widespread conversion of mutual insurance companies, savings and loan associations, and credit unions to stock companies shows that member rights can be enhanced by floating shares in public markets.” (374)
    • Article was included in the Congressional record in a 2008 hearing on electric co-op corruption
  • Doyle, Jack (and edited by Vic Reinemer). Lines Across the Land: Rural Electric Cooperatives: The Changing Politics of Energy in Rural America. Washington, D.C.: Environmental Policy Institute, 1979.
  • Farrell, John. Re-Member-ing the Electric Cooperative. Institute for Local Self-Reliance. March 29, 2016.
    • “Coal accounts for about 75% of energy generated by electric cooperatives, compared to just 32% for the United States’ entire electricity sector”
    • “70% of cooperatives have less than a 10% voter turnout”
    • “more than 900 electric cooperatives serve 42 million (mostly rural) Americans. These cooperatives cover 75% of the nation’s land mass. They deliver 11% of U.S. electricity sales on a network containing 42% of its of its distribution lines”
    • “generation and transmission cooperatives — the co-ops of co-ops — derive 75% of their energy from coal, and comprise 7 out of the 10 most carbon-intensive electric utilities in the nation”
  • Farrell, John. Inclusive Financing for Efficiency and Renewable Energy. Institute for Local Self-Reliance. November 11, 2016.
  • A Guide for Members of REA Cooperatives. Rural Electrification Administration, 1939.
  • Grimley, Matt. ”Just How Democratic are Rural Electric Cooperatives?“ Institute for Local Self-Reliance. January 13, 2016.
    • Most states don't regulate electric co-op rates
  • Highley, Duane. ”Revival!.“ August 11, 2016.
    • President/CEO of Arkansas Electric Cooperative Corp. & Arkansas Electric Cooperatives, Inc.
    • “Pursue the disruptive opportunities. Efficiency and renewable generation aren’t the enemy; they benefit our members. Some see these technologies as disruptive threats to the old business model, but that doesn’t have to be the case. With appropriate rate design a coop can survive, even thrive while lowering their customers’ bills.”
  • Jarvis, Brooke. ”Empowered by the Past: Red State Co-ops Go Green.“ YES! Magazine. April 3, 2013.
    • Emphasizes distinctiveness of co-op structure from other utilities
    • Co-ops have been more advanced than other utilities in pioneering creative financing and metering strategies
  • Kahn, Michael W. ”Survey: Consumers Ready to Embrace Renewables.“ Electric Co-op Today. August 22, 2016.
  • Kang, Cecilia. ”How to Give Rural America Broadband? Look to the Early 1900s.“ The New York Times. August 7, 2016.
    • For a contrasting perspective on the broadband funding, see the Politico report
  • Knapp, Joseph G. ”Rural Electrification via Cooperatives, 1934-1940.“ In The Advance of American Cooperative Enterprise: 1920-1945. Interstate Printers & Publishers, 1973.
  • Lauter, David. ”REA's Tenacity Shows Why Some Government Programs Never Die.“ Los Angeles Times. October 1, 1989.
    • Presents the REA as a case-in-point for how legacy government programs linger long after their usefulness
  • Lincoln, Murray D. Vice President in Charge of Revolution. McGraw-Hill, 1960.
    • “We set up thirty throughout Ohio so quickly that no other state caught up with us. Of the first five and a half million dollars the REA loaned to cooperatives, some five million went into Ohio. We got the program well under way in seven months, although every step of it was a fight. Farmers were just itching to have electricity, and to have it from their own cooperative was a dream come true. We rushed into the business half-blind, not knowing what it was going to cost us, but knowing that it was something that ought to be done and something that we ought to be doing for ourselves.” (133)
  • Miller, Hannah. ”Rural Coops Show the Way to Urban Job Growth.“ Shareable. November 26, 2012.
  • NRECA 21st Century Cooperative Committee, The Electric Cooperative Purpose. National Rural Electric Cooperative Association, 2013.
    • Emphasizes the importance of member engagement and empowerment
    • “Research shows that a critical mass of around 15 percent of loyal engaged member-owners is a tipping point to energize the larger membership” (2). This is also mentioned on p. 17, but no source is cited.
    • “There is a lack of robust cooperative business literature available to the electric cooperative program” (5)
    • An economic rationale for member engagement: “Consumer trust is the 'soft business currency' of the 21st century”…“When trust is low, there is a 'trust tax' in the form of new transactional costs of all sorts that will be demanded by the member-owners.” (19)
    • Sees new tech like on-site and distributed generation as an opportunity for member engagement, and a need for it. “The electricity marketplace is shifting from a commodity-centric model to a consumer-centric model.” (3)
    • In the concluding “Vision of a Successful and Sustainable 21st-Century Electric Cooperative,” principle 2 for boards is “Reflects community diversity” (94)
  • Pennington, Sara and Randy Wilson. ”A Cooperative Approach to Renewing East Kentucky.“ Solutions. July 2010.
  • Power and the Land. Rural Electrification Administration. Informational film. 1940.
  • Schneiberg, Marc. ”Resisting and Regulating Corporations through Ecologies of Alternative Enterprise: Insurance and Electricity in the US Case.“ In The Corporation: A Critical, Interdisciplinary Handbook. André Spicer and Grietje Baars, eds. Cambridge: Cambridge University Press, 2015.
  • Voinea, Anca. ”Florida League of Women Voters backs solar co-ops.“ Co-operative News. August 2, 2016.
  • Vilsack, Tom. ”Rural Electric Cooperatives: Leaders in Renewable Energy.“ USDA Blog. May 9, 2014.