The Cooperative Difference: Board Approves $2.7 Million Member Refund
It’s often said that people cannot effectively pursue conflicting goals. This idea can be applied to both individuals and organizations.
For instance, consider the typical business structure. Investors provide capital to a company and expect to receive a return on their investment. The company operates a business providing a service to its customers for a price. That price must cover any expenses but also include additional profit. That profit is used to both grow the business and provide some income to those investors. If both the investors and customers are getting what they want, it’s a win-win.
This for-Profit model is the basis of capitalism, leading to innovation and more affordable products and services. Yet, without proper oversight, the win-win can break down if companies prioritize profit over service. In that case, the interest of the investor simply doesn’t align with the interest of the customer.
This is exactly what was happening in rural America before the New Deal-era Rural Electrification Act in 1936, which led to the creation of electric cooperatives. Power companies chose to serve only densely populated areas, where they could reach the most customers with the least investment. The resulting problem was that millions of people in rural areas continued living without the modern convenience of electricity. Electric cooperatives changed that.
Groups of rural residents formed their own companies, electric cooperatives, owned by those who would benefit from the electric service. Rather than a distant group of investors reaping the profits from these customers, these “member-owners” pooled their own resources, along with loans from the federal government, and cooperatives sprung up all over the country. Electric cooperative members realize the rewards of both the electric service and ownership.
Thankfully, that electric cooperative business model has persisted for nearly 90 years. 1 of the nation’s most successful business experiments, electric cooperatives remain stronger than ever. 1 main reason cooperatives have been so successful is that they prioritize their members above all else. There was never an incentive to overcharge customers to increase profits. As a member of URE, you’re both the customer and the owner.
Annually, URE’s board determines how much they can give back to their members while still securing a strong financial position for the cooperative and providing excellent service to its members. URE has been returning money from its electric operations for decades. Very soon, they hope to also be able to return funds to their gas members, though that division is still relatively young and continues to build needed equity first.
In the March board meeting, your elected board of trustees authorized management to return $2.7 million in funds to electric cooperative members as bill credits on May power bills. This is money a for-profit company would keep for investors, not give back to customers. Thankfully, through the cooperative business model, our customers also own the company. Member economic participation — it’s the Cooperative Difference!