Co-op 102 Structure Matters


Last month, I talked about the cooperative business model and how it provides superior alignment of interests between the cooperative and its members. Members own and provide leadership to their cooperative by electing representatives to its board. Those representatives, who are also customers, direct the cooperative’s decisions to balance cost and reliability in the best long-term interest of the members. This governance model makes cooperatives unique, but there is more to our success than our governance. The cooperation among our state’s many diverse cooperatives also sets us apart and helps keep your power reliable and affordable.

A key principle in the cooperative business model is “cooperation among cooperatives.” As non-profit entities, we prefer to do business with other non-profit entities in order to keep costs as low as possible. In Arkansas, each of the 17 locally owned, locally governed, nonprofit electric cooperatives serve anywhere from 5,000 to 90,000 homes, farms and businesses, totaling about 1.2 million people across almost two thirds of the state’s land mass. But that’s not the whole picture of the Arkansas electric cooperatives.

In 1942, the electric cooperatives in this state saw a common need and came together to create Arkansas Electric Cooperatives, Inc. (AECI), a statewide service organization that today manufactures and sells electrical equipment, manages warehouses, conducts high-voltage testing, clears the right-of-way for electric transmission lines, constructs new lines and electric substations, and prints this magazine, among other things. It has assets totaling $285 million. This service organization is operated as a nonprofit cooperative, so any revenue not needed to cover expenses can be returned to the 17 member cooperatives that own it, reducing their costs even further and helping them keep your rates as low as possible.

Later, in 1949, the Arkansas electric cooperatives saw the need for an organization to manage a portfolio of electric generation and transmission assets for the benefit of all. Today, this organization, Arkansas Electric Cooperative Corporation (AECC), holds assets of $1.8 billion, which include wind, solar, hydroelectric, biomass, and natural gas- and coal-based generating resources. These assets work together to produce power at rates that are the lowest of any peer organization in the nation! How’s that for value?

These two organizations, AECI and AECC, work together with the 17 electric distribution co-ops they serve to provide reliable power at the lowest reasonable cost. AECI and AECC, based in Little Rock, are each governed by a board of directors elected from the boards of the 17 local electric distribution cooperatives. As your CEO, I report to those directors, each of whom is a cooperative customer. I seek their approval for our plans, rates and budgets. There is no better system for ensuring alignment between the interests of the customer and the leadership of the cooperative, because in these cooperatives, the customer is the leader.

The U.S. Energy Information Administration recently reported residential electric rates in Arkansas as the third-lowest in the nation. That result is supported by the efficiency of this united electric cooperative network, with nonprofit co-ops working as an integrated team, all focused on the goal of providing you, the member-owner, with reliable, affordable power, responsibly. That’s another way that cooperatives are different.