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About Cooperatives

Why do we have electric cooperatives?

The Rural Electrification Administration was created in 1935 to provide electric service to every farm and home in rural America. Cooperatives were formed when the investor-owned utilities showed little interest in using the Rural Electrification Administration  loan funds to build electric lines into sparsely populated rural territory. The Rural Electrification Administration  helped local leaders start electric cooperatives in order to electrify rural America. Currently, there are approximately 1,000 rural electric cooperatives operating in the United States. In Iowa, there are 39 distribution cooperatives and seven generation and transmission cooperatives. Several distribution cooperatives in Minnesota and Missouri serve customers in Iowa.

What is a cooperative?

A cooperative is an independent, locally owned business enterprise, incorporated under the laws of the state in which it operates. Consumers who receive service are member-owners of the cooperative and share responsibility for its success or failure, along with the benefits they receive. The consumers own each cooperative, with each member of the cooperative having one vote in the election of directors. An electric cooperative is a utility, operated on a not-for-profit basis by returning any net savings to the member-owners on the basis of patronage. Cooperatives are guided by cooperative principles.

What are the cooperative principles?

Seven principles guide the overall cooperative structure. They include:

1. Voluntary and Open Membership

Cooperatives are voluntary organizations, open to all persons able to use their services and willing to accept the responsibilities of membership, without gender, social, racial, political or religious discrimination.

2. Democratic Member Control

Cooperatives are democratic organizations controlled by their members, who actively participate in setting policies and making decisions. Men and women serving as elected representatives are accountable to the membership. In primary cooperatives, members have equal voting rights (one member, one vote) and cooperatives at other levels are organized in a democratic manner.

3. Members' Economic Participation

Members contribute equitably to, and democratically control, the capital of their cooperative. They usually receive limited compensation, if any, on capital subscribed as a condition of membership. Members allocate surpluses for any or all of the following purposes: developing the cooperative, possibly by setting up reserves, part of which at least would be indivisible; benefiting members in proportion to their transactions with the cooperative; and supporting other activities approved by the membership.

4. Autonomy and Independence

Cooperatives are autonomous, self-help organizations controlled by their members. If they enter into agreements with other organizations, including governments, or raise capital from external sources, they do soon terms that ensure democratic control by their members and maintain their cooperative autonomy.

5. Education, Training and Information

Cooperatives provide education and training for their members, elected representatives, managers and employees so they can contribute effectively to the development of their cooperatives. They inform the general public—particularly young people and opinion leaders—about the nature and benefits of cooperation.

6. Cooperation among Cooperatives

Cooperatives serve their members most effectively and strengthen the cooperative movement by working together through local, national, regional and international structures.

7. Concern for Community

While focusing on member needs, cooperatives work for the sustainable development of their communities through policies accepted by their members.

Are there other types of utilities serving Iowa's consumers?

In addition to cooperatives, there are investor-owned and municipal utilities. Investor-owned utilities are owned by investors or shareholders and operate on a for-profit basis, with profits and losses flowing to the shareholders. Municipal utilities are owned and operated by municipal governments. Profits and losses flow directly or indirectly to the municipal government. Currently, there are two investor-owned utilities and 136 municipal utilities in Iowa.

What is a distribution cooperative?

A distribution cooperative is an organization that purchases wholesale power from its generation and transmission cooperative or other suppliers and delivers power at cost to consumer-members. Cooperatives are the original aggregator.

What is a generation and transmission cooperative?

A generation and transmission cooperative is owned by and supplies power to a group of local distribution cooperatives. A generation and transmission cooperative either generates the power, purchases it contractually from public or investor-owned utilities or obtains the power through a combination of arrangements.

What is The Rural Electrification Administration ?

The Rural Electrification Administration is a former federal agency within the U.S. Department of Agriculture that administered loan programs and provided technical assistance to rural electric systems. The term Rural Electrification Administration is often used erroneously as a synonym for the locally owned cooperatives whose growth has been financed with loans from the agency. In 1994, Congress combined The Rural Electrification Administration with other agencies to form a new Rural Utilities Service.

What is Rural Utilities Service?

On October 12, 1994, the reorganization bill established the Rural Utilities Service and abolished the old Rural Electrification Administration. The Rural Utilities Service is comprised of the electric and telecommunications programs of the old Rural Electrification Administration and the water and wastewater programs of the former Rural Development Administration. Rural Utilities Service's rural electric, telecommunications, and water and waste disposal programs have the common goal of rural economic development.

What are the Articles of Incorporation?

The Articles of Incorporation provide the legal framework for the creation of the corporation. This basic instrument is filed with the Secretary of State.

What are Bylaws?

Bylaws specify the regulations, ordinances, rules or laws adopted by the cooperative for the purposes of governing the cooperative. Bylaws can be voted on by the members of the cooperative.

What are Board Policy Manuals?

The Board Policy Manual should include all policies that the board has established. Policies should include issues—but not limited to—concerning board relationships, committees and finances.

 
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