Rural electric co-ops serve owners

Democratic member control. Economic participation by members. Concern for community. Local, national, regional and international cooperation.

These may sound like the lofty aims of a human-rights organization, but they are the guiding principals of rural not-for-profit electric cooperatives -- private, member-owned utilities that provide power to Missouri customers.

Though organized differently than corporate utilities, cooperatives and investor-owned entities depend on each other to keep residents connected to the grid. But with few customers per mile of service line, co-ops have to be careful with resources in order to meet members' needs, satisfy legislative mandates and stay competitive.

"The cooperative business model created a means for people to come together and improve the quality of their lives by securing electric service for themselves. That life-changing opportunity provided a generation of Americans with growth, economic security and unmatched political strength," said Sean J. Vanslyke, chief executive officer and general manager of SEMO Electric Cooperative, which serves 16,000 members -- or meters -- throughout Cape Girardeau, Bollinger, Mississippi, New Madrid, Scott and Stoddard counties.

The Association of Missouri Electric Cooperatives, headquartered Jefferson City, Mo., was organized in 1937 and represents the legislative interests of the state's 47 electric co-ops and their members. Former U.S. Rep. Jo Ann Emerson left Congress to serve as president and chief executive officer of the National Rural Electric Cooperative Association, a not-for-profit organization that represents more than 900 rural electric cooperatives across the country.

The main difference between corporate utilities and rural co-ops is ownership, said Barry Hart, chief executive officer of AMEC.

In the case of co-ops, the owners of the utility are the people who receive electrical services, Hart said. The member-owners, by state law, have an annual meeting during which fellow consumers are elected to the board of directors. That board has a fiduciary responsibility to the membership and hires management to run the co-ops. The board also sets policy.

"That's one of the real strengths of the local co-ops -- the board is close to the local membership," Hart said." That really keeps them local and on target."

Capital credits are allocated to each SEMO Electric member-owner every year based on participation. The board of directors determines the basis for the allocation, which is based on the kilowatts of electricity used and SEMO Electric's financial position, Vanslyke said.

"In 2012, SEMO Electric refunded $409,000 in capital credits to its member-owners. This was the 18th consecutive year the cooperative has been able to refund capital credits, a total of $9.7 million," Vanslyke said.

Citizens Electric Corp. serves more than 26,000 members in Saint Genevieve and Perry counties and portions of St. Francois and Cape Girardeau counties. Over the past 13 years, CEC has returned more than $19.1 million in capital credits to its members. Customers "build equity in the corporation every time they pay their electric bills" said Van Robinson, chief executive officer for Citizens Electric.

Still, the value of the business model is not always apparent, he said.

"A challenge of being a modern electric cooperative is sharing our story with younger members. Most of our older members remember when electricity was a luxury and experienced firsthand the creation of rural electric cooperatives. Our members who didn't have this experience often don't realize there's a difference between co-ops and investor-owned utilities and that we have different missions. We also find that it's very challenging to explain the rising cost of power supply and the impact that markets, legislation and regulation have on this cost," Robinson said.

The Clean Air Act, created in the early 1990s and amended over the past two decades, authorized the Environmental Protection Agency to create mandates to reduce hazardous air pollutants, such as mercury, from power plant emissions. The EPA estimates more than 230,000 early deaths will have been prevented by 2020 as a result of protections put in place by the Act. But improvements to meet the EPA's goals have been expensive.

"Stricter EPA regulations are causing power plants nationwide to spend billions of dollars to reduce emissions. In some cases, modifications cost more than the original investment to build the power plant. It's likely that some older coal-fired plants will be closed and costly investments will need to be made in new plants. These expenditures all affect the cost of power supply, which is approximately 80 percent of Citizens' costs," Robinson said.

To try to offset the costs of relying on older technology, electrical co-ops are investing in a diverse portfolio of energy sources.

Citizens' power provider is Wabash Valley Power Association, a not-for-profit generation-and-transmission cooperative, which is actively working to further diversify its fuel portfolio to balance reliability and affordability, Robinson said. Their sources include natural gas, nuclear, pet coke, renewables -- such as landfill gas, biogas, wind and solar -- and coal.

"Coal once represented the vast majority of Wabash's portfolio but has declined to approximately 54 percent of our energy needs in 2012. Wabash's goal is to have 10 percent of its portfolio made up of alternative fuel sources by 2018. Unfortunately, these alternative sources usually are more expensive and less reliable than the coal sources they replace," Robinson said.

Vanslyke said maintaining a full portfolio energy sources helps keep costs down, which supports growth in the region. Robinson and Vanslyke both said their co-ops try to set prices as close to actual cost as possible. Affordable electricity makes the area attractive to investors, Vanslyke said, which is important to everyone, not just coop members.

Regardless of size, electrical co-ops are connected to the same transmission grid that larger corporate utilities use. Because maintenance is so costly -- repairs from the ice storm that hit Southeast Missouri in 2009 cost SEMO Electric more than $20 million in labor and materials -- all public, private and municipal utilities are connected and must rely on each other to avoid potentially massive breakdowns, Vanslyke said. Boundaries between providers were set over time, based on various historical occurrences, he said. When potential customers fall on service area borders, things can get competitive, but Vanslyke said it is in everyone's interest to do what's best for the area. Concern for community, after all, is a guiding principal.

"At the end of the day, we all have to work together," Vanslyke said.

salderman@semissourian.com

388-3646

Pertinent address:

150 Merchant St., Ste. Genevieve, MO

1505 S. Main St., Sikeston, MO