Nonprofit Cooperatives Serve Thousands Across State

by Luke Jones  on Monday, Apr. 2, 2012 12:00 am  

Each year, hundreds of thousands of Arkansans use cooperatives, nonprofits with unique models allowing customers to join the companies as members.

There are several types of cooperatives: utility co-ops, credit unions, farm co-ops, housing co-ops and food co-ops, among others.

(Click here for a sidebar on credit unions, and here for a sidebar on the state's only food co-op.)

Of these, utility cooperatives are the largest, with 500,000 members across the state. Arkansas Electric Cooperatives Inc. was formed in 1942 to provide a legislative voice for the state's 17 local electric cooperatives. Another part of the organization, Arkansas Electric Cooperative Corp., supplies wholesale power to utility co-ops in the state.

"We're not for profit; we have no shareholders," said Doug White, vice president and corporate spokesman for AECI. "Our members are equity owners of the cooperative, and any money garnered above and beyond the margins are returned to them in the form of capital credits, essentially a dividend."

The dividend is different for every co-op. First Electric Cooperative of Jacksonville, for example, paid out $3.8 million in capital credits in 2011. Sometimes the payout is a simple check; other times it can be used as credit toward future electric bills.

The utility co-op model started shortly after electricity became prevalent in urban areas. It began in Arkansas with First Electric, established in 1937 under Franklin D. Roosevelt's Rural Electrification Act. The idea was to spread power outward into more remote areas, something that the existing power corporations had little desire to do.

"Cooperatives formed to serve those who would have otherwise not had electricity," said Rob Roedel, communications manager for AECI.

In 1938, First Electric had 150 members in the Jacksonville area. According to Tonya Everhart, First Electric's vice president of marketing and communication, it now has 88,000 throughout Jacksonville, Heber Springs, Benton, Perryville and Stuttgart. Early on, membership spread by word of mouth.

"As a member, you would try to get your neighbor to sign up, and that way you could continue that line of power," Everhart said.

Landwise, about 34 percent of the state is served by electric co-ops, with about 60 percent served by Entergy Arkansas and the rest by utilities with small pieces of the state.

Generally, most co-op districts started in rural areas. That's changed over the years, however.

"It used to be rural, but now, not so much," Roedel said. "Thirty years ago, when you looked at northwest Arkansas, it was probably considered mostly rural. But now, it's not - and those are co-op-served areas."

White said co-ops serve about 90 percent residential members and 10 percent commercial and industrial, but the industrial members tend to be very large, with some notable examples being Nucor Steel of Hickman, the Remington Arms plant in Lonoke and a number of paper factories.

Often, utility cooperatives have community outreach programs. First Electric allows members to round their monthly bills up to the nearest dollar and donate the added change to nonprofit organizations for scholarships, disaster relief and other funds.

"In the last cycle we had in November, there was more than $16,000 given away," said Tori Moss, communications coordinator for First Electric. "It's really an amazing thing that our members do it."

 

Power Struggle

Challenges for utility co-ops usually come from the federal level.

"The uncertainty of federal energy policy is probably the big one for us," White said. "We build a power plant to last for 50 to 60 years, but with each administration, the rules of the game tend to change. The whole industry was pushed to coal in the '70s and '80s, but now coal is attacked. We went away from natural gas because of its scarcity, and now there's an abundance of natural gas."

Nuclear power was about to have its day, White said, until a 2011 earthquake and resulting tsunami damaged a nuclear plant in Fukushima, Japan.

White said it's also been difficult to balance the demand for renewable energy versus its actual cost.

"A utility customer knows two things about his bill: First, it's too darn high, and second, it better not be as high as last month," White said. "People are clamoring for more renewable energy like solar and wind, but the reality is, when you start talking about the high price tag associated with it, people start to balk."

Other than that, White said, co-ops are portraits of stability. Suburban spread is growing co-op service territory, which gives them more members and the ability to invest in energy efficiency.

Unlike for-profit utilities, member-owned cooperatives have always had an incentive to sell as little electricity as possible at the lowest possible price.

"Co-ops are recognized as leaders in energy efficiency," White said. "We started programs in Arkansas that have been copied nationwide. We were the first to offer green power programs, and we have a higher percentage of geothermal ground source heat pumps than just about anywhere."

 

 

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