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Co-ops: The value of membership

What are the differences between cooperative and investor-owned utilities (IOU)?

We get that question often from members who have a friend or neighbor served by Xcel Energy or Minnesota Power and who may have a lower electric bill because of it. It’s a good question, given the fact that we’re both electric utilities, using very similar equipment to do the same type of work.

The difference between ECE, which is a cooperative, and an investor-owned utility like Xcel or Minnesota Power is in the way our businesses are structured. We are not-for-profit and democratically controlled by you, the members and owners of the co-op. When we collect more money than we need to bring you safe, reliable electricity, we return that money to you in the form of capital credits. An IOU is capitalized, owned and directed by investors, who work to maximize a return on their investment. Profits go back to the investors, not to the customers, which brings us to another major difference between the two types of utilities.

Co-ops originated to serve rural areas, where the return on expensive infrastructure investment, the poles and lines, was not high enough to attract IOUs. ECE serves 7.13 members per mile of line in a service territory of 4,300 square miles. In 2016, we collected $14,615 per mile. IOUs average 34 customers per mile of line and collect $75,500 per mile, or over five times more than we collect.

Their costs for installing and maintaining the electric system are comparable to ours. For example, it costs us an average of $78,500 to serve seven members. That cost would be similar for an IOU, but instead of seven consumers to share the cost, they have about 34.

Co-ops work hard to provide excellent value for the dollars you spend. We routinely score higher than IOUs on the American Customer Satisfaction Index, receiving high marks for providing reliable service and for responding to our members. Locally owned and operated, we empower members to improve the quality of their lives through economic development, education, environmental stewardship, and community involvement.

At ECE we know we’re not the lowest-cost power supplier, but we work every day to be the one you’d choose. We encourage you to call us with questions, to offer your suggestions and to share your concerns. You’re a member of this co-op family, and we’re here for you.

 

Consumers served per mile of line. Invester-owned 34. Member-owned 7.13

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