There is a Cooperative Difference

August 17, 2016

In the U.S., the vast majority of people receive their electricity from one of three types of utilities; investor-owned, municipal-owned or through their electric cooperative, which is owned and controlled by the people who use it. Let’s take a closer look at these three types of ownership models and see why it matters to you.

In the investor-owned model, the corporation is owned by a great number of stockholders who may or may not be real customers of the utility. Investor-owned utilities tend to be very large corporations such as American Electric Power (AEP) or Xcel. They serve large cities, suburban areas and some rural areas, too.

In most cases, investor-owned utilities (IOUs) have few employees in the communities where they operate. This, combined with the fact that they have outside investors whose sole motive is to make a profit on their investment, generally tends to lead to less personalized service. About 72 percent of the U.S. population is served by investor-owned utilities.

Municipal electric systems, as the name implies, are government owned. They can serve large cities, like Los Angeles, Austin or Orlando, or smaller areas, like Lubbock. In municipal systems, the city runs the utility with little to no meaningful oversight from the citizens. About 16 percent of the market is served by municipal utilities.

Electric cooperatives serve the smallest number of consumers, about 12 percent of the market, which equals 42 million people. There are more than 800 other electric co-ops in 47 states in addition to South Plains Electric Cooperative. While co-ops serve the fewest number of people, our electric lines cover more than 75 percent of the U.S. landmass. This is because we provide power where others once refused to go because of the low population density. Electric co-ops rank highest in member satisfaction among the three types of utilities. South Plains Electric earned an American Customer Satisfaction Index of 89 in 2015. We believe this is because we serve member-owners, not customers.

The uniqueness of the electric cooperative model as a service organization speaks to its effectiveness and vitality. One of the amazing facts about electric co-ops is that they have operated in the United States for more than 80 years, and during that time the basic model hasn’t changed.

Members and co-op staff don’t want to miss a single opportunity to keep the cost of power to a minimum. For us, that goal involves minimizing expenses and maintaining a quality system that delivers the kind of service members expect and deserve, even in our system with 4 percent annual growth.

In 2015, we added a total of 2,041 meters with 1,210 residential and 281 commercial.

We ended 2015 with a small negative operating margin, so we will not be sending capital credits back this year. Reinvesting members’ money into our growing system is more cost effective than borrowing money. The Board reviews finances monthly and makes decisions based on keeping the Cooperative financially strong into the future.

The Board worries about the monthly bill you receive and the PCRF (power cost recovery factor) plays a big part. We are proud that members saw a negative PCRF on 11 out of 12 bills in 2015, and the 12th one was at zero. This is evidence that your Board is making good wholesale power purchase decisions.

The cooperative business model is a great one. More than 100 years ago, President Theodore Roosevelt recognized this value when he said, “The cooperative is the best plan of organization. Under this plan, every business is [governed by a board]; every person has one vote and only one vote. Everyone gets profits based on their use of the co-op. It develops individual responsibility and has a moral as well as a financial value.” There is a cooperative difference. You own us, and we are here to serve you!