What is an electric cooperative?
Cooperatives are different from other utilities in that they are owned by their members - the people who receive the service actually have part ownership of the co-op. Electric cooperatives are not for profit businesses. They are similar in concept to other consumer-owned businesses; including farm produce marketing co-ops and news-gathering and reporting co-ops, like the Associated Press. All cooperatives were formed out of what is known as the “Rochdale Principles,” so-named because of a system designed by a group of 28 weavers in Rochdale, England, to market their products.
A total of 33 consumer-owned electric cooperatives, or co-ops as they are more aptly known, operate within state borders. Thirty of those co-ops are members of the Oklahoma Association of Electric Cooperatives, a non-profit, service and training-oriented association which collectively represents electric co-op member systems and the nearly 500,000 consumer-owners they serve.
What does it mean to be a “consumer-member” or a “consumer-owner?”
Each consumer of the cooperative is a member, with a vote in the affairs of the cooperative. Bylaws, adopted by the members, set forth their rights and responsibilities and lay out the guidelines that assure a democratic organization. Members elect directors to serve on a Board of Trustees, and an annual meeting is held to conduct the business of the cooperative. Local boards employ a professional manager for the co-op, and the manager then has the duty of hiring trained personnel to perform the work necessary for the co-op to function.
How is member compensation determined?
The local cooperative Board establishes rates, based upon what it actually costs to provide dependable electric service, and to meet payment schedules on loans. Rates are designed so that revenues exceed expenses. This “margin” is allocated back to members of the cooperative in the form of capital credits. Members receive money back based on the amount of electricity they have used during the allocation period. This return of capital maintains the non-profit status of the cooperative.
Do co-ops pay taxes?
Most electric cooperatives are exempt from federal income taxation under Internal Revenue Code section 501(c)(12). To maintain its exemption, an electric cooperative must collect 85 percent or more of its income from members for the sole purpose of meeting losses and expenses. The cooperative must also operate according to the cooperative principles of subordination of capital, democratic member control, and operation at cost.
An exempt electric cooperative must pay tax on its unrelated business taxable income, which generally includes income from any trade or business not substantially related to the cooperative’s exempt purpose. If a rural electric cooperative loses its exemption, then it is taxed under the law existing in 1962, as well as other common law, governing cooperatives.
What have rural electric cooperatives accomplished in developing rural areas?
Dependable, affordable electric service is vital to rural area development and electric coops are bringing low-cost power to their service areas. These electric systems also work with other community leaders and take the lead to encourage new industries and better community facilities for rural areas. This development is essential, since it provides additional jobs, larger payrolls, and better living conditions that will make small towns and the countryside more attractive as places to live and work. Since 1961, rural electric and telephone systems have joined in sponsoring over 15,000 projects that have created over 2.5 million new jobs in rural America.
Does a co-op only serve rural consumers?
Although cooperatives are proud of and connected to rural roots, cooperatives do not serve purely rural consumers. Today, nearly 100,000 miles of electric distribution line brings power to people who choose to live and work in both rural and urban settings across Oklahoma. This is almost twice the amount of electric line owned and maintained by the state’s two largest investor-owned utilities.
What security does a co-op offer in times of radical technological change?
Because of increasing demand for electric energy by Oklahoma consumers, co-ops are stepping up to the challenge by planning for the future. New generation assets utilizing a variety of fuel sources - including an ever-expanding role for renewable energy - are being planned for construction.
The goal of the cooperative is to provide leadership in ensuring safe, clean, efficient and affordable electric energy is always available for our consumer-owners, no matter what the weather or economic conditions may be, year-round.
We are proud to power the needs of a new generation of Oklahomans. After all, it’s our energy and our future.
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