Academic journal article Management Quarterly

Vital Signs: NRECA's Summary of Distribution Cooperative Data

Academic journal article Management Quarterly

Vital Signs: NRECA's Summary of Distribution Cooperative Data

Article excerpt

Vital Signs, first produced in 1985, is an annual analysis of the data reported by rural electric systems, from the end of the previous calendar year. This year's report is based upon 2008 data from 820 distribution systems.

The 2008 operating data demonstrate that electric distribution cooperatives continue to have strong financial performance in spite of the currently challenging economic conditions.

Cooperative Sales Growth

Distribution cooperative sales growth has generally surpassed that of the total electric utility as a whole over time, and did so again in 2008 with sales increasing 1.9% over the previous year. Distribution cooperatives sold 397 billion kWh in 2008, up nearly 2% or 7.5 billion kWh over 2007. Although this was a modest growth compared to last year's growth rate of 4.4%, it was higher than the electric utility industry as a whole which saw flat or declining sales in 2008. In fact, over the past 10 years, the nation's electric cooperatives have averaged 3.4% annual sales growth. (1) By contrast, data from the United States Energy Information Administration (EIA) shows that total sales for the industry as a whole declined.

In addition, while costs and rates continued to trend upwards, cooperatives maintained their financial strength and managed some productivity gains in terms of customers per employee.

Cooperative Sales Growth Continues to Outpace the Industry

KWh sales of electricity in 2008 declined across the U.S. electric industry as deteriorating economic conditions weighed heavily on sales growth. There has not been such a sharp decline in sales since the height of the California electricity crisis in 2001. Despite this, rural electric cooperatives saw sales increase by nearly 2% in 2008. Distribution cooperatives sold 397 billion retail kWh in 2008, 7.5 billion kWh more than the prior year. Over the long-term, cooperatives have generally had higher sales growth than the rest of the industry. In fact, in the last 10 years, cooperatives averaged 3.4% annual sales growth compared to only 1.3% for the industry as a whole. Electric cooperative retail sales account for about 10% of all electricity industry sales.


2008 Cooperative Sales Growth

The overall rate of consumer growth was also down in 2008, a result of the economic downturn and sharp decline in new housing construction. While cooperatives typically see annual consumer growth rates of nearly 3%, last year's growth was only 1.9% overall, and was only 1% for the median cooperative. The number of seasonal consumers (vacation and recreational homes) actually fell by 1.2%. Some traditionally fast-growing areas of the country, such as the southeast, saw slow or even flat growth for the first time in years. Nationwide, cooperatives now serve a total of 18.2 million consumers or about 42 million people. That is about 12% of all electric consumers.


Cooperative Growth Leads Industry

America's electric cooperatives now serve 18.2 million consumers (about 42 million people). The rural electric network added 338,475 new members in 2008--an increase of 1.9%, the lowest rate of growth in many years. Typically, cooperative consumer growth is stronger than other segments of the electric utility industry. Many electric cooperatives have been impacted by serving near high-growth metropolitan areas such as Denver, Dallas/Ft. Worth, Atlanta, Washington DC, Minneapolis/St. Paul and throughout Florida. Other cooperatives are located near pockets of low growth in remote and/or economically depressed areas around the country. Persistent low growth occurs in the rural south around the Mississippi Delta region and in the rural areas of Kansas, Nebraska, Iowa, Minnesota and the Dakotas.


Residential Usage Higher in Cooperative Service Areas

The majority of a cooperative's sales are residential--nearly sixty percent. …

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