‘A Community Focus’: The Value of the Co-op Model

As electric cooperatives continue to adapt to what could be the most challenging and disruptive time in their 80-year history, recent national data validates what history has repeatedly shown to be true: The co-op business model is uniquely suited to thrive in times of change.

An explosion of new operational technologies, spiking demand growth, unprecedented reliability pressures, extreme weather events, unhelpful public policies and escalating cybersecurity concerns are just a handful of the strains that the electric utility industry is experiencing.

These and other challenges will test all utilities over the coming years. But new studies show that co-ops are poised to seize the opportunities these times bring because of three critical facets of the co-op business model: their member focus, their local perspective and collaboration with their fellow co-ops and their G&Ts.

“Electric cooperatives bring a community focus to the changes that we’re seeing in the energy industry,” says NRECA Chief Operating Officer Jeffrey Connor.

“Every cooperative is different, but they all leverage partnerships in strategic ways to share experiences and create value across the network. Electric co-ops are truly unique in our industry.”

In early 2024, NRECA launched the Value of the Cooperative Model initiative, a first-of-its-kind research effort aimed at quantifying the strengths and weaknesses of co-ops in managing change. An advisory group of 10 leaders at large and small co-ops and NRECA helped guide the process, which involved two separate national studies and resulted in a detailed white paper about the value of the cooperative business model in navigating industry challenges, a lexicon for how best to communicate the co-op value to members and the public, as well as a new education course for G&T directors.

The studies revealed a “robust model that has adapted to the changing needs and expectations of its members while staying true to its fundamental cooperative principles.”

“It’s really important to take a step back during this time of monumental change to look at the bigger picture and say, ‘We’ve had this business model in place for a long time, to meet the members’ needs, but how do we best communicate and explain the unique value that co-ops bring to this industry,” says advisory group member Lisa Johnson, CEO and general manager of Seminole Electric Cooperative in Tampa, Florida.

Patrick O’Loughlin, recently retired president and CEO of Buckeye Power in Columbus, Ohio, and a former member of the advisory group, noted that the co-op model has always been an industry advantage with no facet more important than member focus.

“We are still basically focused along the same principles, but what does change are the circumstances, the problems we have and the opportunities we have,” he says. “But by being able to have a singular focus on what’s in our members’ best interests and understanding our local communities, it helps co-ops make the right decisions for them. And by having that single member focus, we’re able to get it right more often.”

Four sources of value

NRECA worked with ScottMadden on the white paper and with maslansky+partners on a lexicon “playbook.” The white paper underscores four core sources of value within the co-op model:

1. Price, cost and reliability. Nationally, co-ops offer comparable or lower prices compared to investor-owned utilities despite frequently serving lower-density, higher-cost areas, the study found. About 8 in 10 co-ops work through a G&T to secure wholesale power supply, including ownership and operation of shared generation facilities and transmission infrastructure. G&T rates vary by region, but all show substantially less volatility compared to the market. Other co-ops secure power through bilateral agreements with public and private utilities, through organized wholesale markets or through developing their own local generation options.

“The co-op model allows us to take into consideration the big-picture things that are happening around the country in our state and in our local community, as well as the circumstances that each individual co-op has,” says O’Loughlin. “Then we make decisions that are in the interest of our membership, so we end up providing the people that we serve with the best service we can at the lowest cost that’s available. Our motivations are pretty clear and pretty simple.”

2. Governance. The democratic, member-owned governance structure of cooperatives provides local control and accountability. Distribution co-ops are the direct point of contact with consumer-members at the end of the line, while groups of cooperatives—such as G&Ts or statewide associations—determine common interests and develop strategies to achieve them through their member-directed governance processes. Maintaining alignment across members and making decisions that are optimized in the interest of collective needs is paramount and a hallmark of co-ops.

3. Long-term power supply agreements. Contracts between distribution co-ops and their generation partners provide stable, affordable power, enable long-term planning and financing of generation and transmission assets and help minimize risk.

4. Joint services beyond wholesale power supply. Co-ops pool resources on generation and transmission, but also in other areas, including safety training, IT, marketing and communications, external and government relations and operations support.

“The co-op model is the most democratic, efficient and socially responsible way to provide essential services,” says Hood River Electric Co-op General Manager and advisory group member Libby Calnon. “Co-ops are built on collaboration, local control and local economic participation. We exist specifically to provide value to our members. And in my view, there’s just no better way to provide an essential service to a community than that.”

‘A community-minded attitude’

The ability of the co-op model to succeed amid challenges is getting noticed.

Then-RUS Administrator Andrew Berke recently noted: “I’ve visited co-ops all over the country, have been to member meetings, and have had so many conversations with rural electric co-op executives and board members. Every co-op, of course, is different, but at the same time you see consistencies across the industry—focus on reliability, resilience and affordability and a community-minded attitude—that are the foundation of what makes them successful.”

That foundation is one of the reasons that federal infrastructure funding has been directed toward hundreds of electric co-ops.

Arizona G&T Cooperative CEO and Executive Vice President Patrick Ledger says his G&T’s close relationships with its member co-ops was a deciding factor in their recent successful bids for three federal grants, totaling $550 million.

“We could bring the needs of smaller utilities together into larger-scale flexible resources,” he says.

This deep G&T/member co-op partnership is a key focus throughout the lexicon and white paper projects. The messaging research found “a capability gap” exists with consumer-members when they are asked about their cooperative’s ability to deliver reliable, affordable energy.

“Many don’t know about G&Ts,” the playbook says, adding that “one in two consumer-members don’t know where their co-op gets power from.”

To address that gap, the playbook recommends explaining that G&Ts are part of a larger co-op network, positioning the relationship “as a community of co-ops to suggest the scale, resources and strength that result from the co-op model—while staying true to the heart of the larger co-op story.”

“When co-ops cooperate, it allows them to gain scope and scale to compete with much larger organizations and yet stay grounded in their local community,” says Rob Hochstetler, advisory committee member and president and CEO of Central Electric Power Cooperative in Columbia, South Carolina.

Committing to a common language when talking about the co-op/G&T relationship is particularly useful when delivering the message about co-op capabilities to lawmakers.

“The nation just went through an election, and there’s a whole new group of policymakers in Washington who may not be versed in the value of the cooperative model, and it is critical to explain our model as they prepare to set energy policy for the country,” says NRECA Senior Vice President for Communications Ken Lisaius. “This playbook is a resource available to our members to help them communicate the value that cooperatives bring to their consumer-members.”

The final project from the NRECA initiative is a new Board Leadership Certificate (BLC) course for directors about G&Ts. The Value of the Generation, Transmission and Distribution Relationship (BLC 960.1) reviews the financial, legal and operational challenges currently facing G&Ts as well as the complexity of directors’ oversight responsibilities.

NRECA designed the course to help distribution co-op directors refocus on “the value of their relationship with their G&T and how it’s expressed,” especially during this period of turmoil in the industry, says Pat Mangan, NRECA’s senior director of governance education.

“It’s been a very popular offering,” says Mangan.

The course, which is capped at 35 participants per delivery to ensure a high level of conversation, interaction and discussion, was delivered 17 times in 2024, with more slated for this year.

“It’s important that distribution co-ops and G&Ts understand and appreciate the challenges faced by one another,” says Mangan. “It re-emphasizes the strength of what it means to be part of an electric cooperative working with like-minded individuals all pulling in the same direction.”

This article was originally published on the Rural Electric (RE) Magazine by Victoria A. Rocha.