The Co-Op Compass
By Richard G. Johnstone, Jr.

If you’re entering a strange environment, or one with few landmarks, it’s good to have a compass, to keep you pointed in the right direction. Cooperatives and all other electric utilities are just beginning to enter a strange environment, as restructuring unfolds according to the plan laid out by the Virginia General Assembly last year and all electric utilities in the state prepare for competition beginning in 2002.

As you may know, electric competition will involve users selecting the company that provides their electric energy. The company that delivers this electric energy to homes and businesses — in your case, your local cooperative — will remain the same.

The path to restructuring and competition is hardly easy, or smooth. This is evidenced by the experience of customers in the handful of states where competition has already been introduced. In those states, few if any utilities are vying for the business of residential and small business customers; not surprisingly, utilities are courting the large commercial and industrial users of electricity, who thus far are enjoying most or all of any savings.

And the whole topic of electric restructuring has received a substantial amount of negative publicity recently, due to the situation this past summer in the San Diego, California area. Out there, an insufficient supply of electricity met a rising demand for it in an environment in which the regulatory rate protections for customers had been removed, resulting in some users paying two, three, and even four times as much for electric energy as they had before.

Thankfully, Virginia’s General Assembly provided built-in protections for electric customers, with a three-year phase-in of competition between 2002 and 2004, and rate caps until 2007. And Virginia’s 13 member-owned electric cooperatives were the leaders in insisting upon these protections as Virginia’s lawmakers in 1999 crafted the bill restructuring the electric utility industry. And we pledge to continue vigilantly and passionately working to protect your interests —and those of other residential and small business consumers — as the restructuring process continues to unfold.

In the meantime, with October being Cooperative Month, we thought it would be helpful to list our "compass points," the seven principles that have guided cooperatives all over the globe since the 1840s, when a group of weavers established the first modern cooperative in Rochdale, England.

Principle # 1 — Voluntary and Open Membership. Cooperatives are open to all persons able to use their services and willing to accept the responsibilities of membership.

Principle # 2 — Democratic Member Control. Cooperatives are democratic organizations, owned and controlled by their members. The board members who set policy are elected from the membership.

Principle # 3 — Members’ Economic Participation. Cooperatives are operated on a not-for-profit basis. Any profits (called "margins" in a cooperative) are allocated to the members and later returned to them as patronage capital (or "capital credits").

Principle # 4 — Autonomy and Independence. Cooperatives are autonomous, self-help organizations. They are "beholden," as it were, only to their members.

Principle # 5 — Education and Information. Cooperatives communicate regularly with their members. Cooperative Living magazine is a 54-year-old testimonial to this commitment.

Principle # 6 — Cooperation Among Cooperatives. Cooperatives serve their members best by working together. Twelve cooperatives in Virginia, Maryland and Delaware years ago formed Old Dominion Electric Cooperative to provide themselves with a reliable, affordable energy supply. Old Dominion owns about half of the electric generating needs of these 12 local cooperatives, through ownership interests in two power plants. This ownership is more valuable than ever before, since it provides cooperatives with a measure of price stability with competition (and its potential for price volatility) ahead.

Principle # 7 — Concern for Community. Cooperatives are locally owned and locally controlled, locally staffed and locally focused. They’ve been in the communities they serve since before World War II. They work hard to ensure that your community — their community — is as healthy and prosperous as possible, in every good sense of those words.

The bottom line: Once competition begins in 2002, other companies may want to sell electricity to you. Or they may not, since the overwhelming majority of cooperative customers are residential and small business accounts, and as "little guys" may offer little in the way of profit to these electricity marketers.