Electric Cooperatives: Competitive and Efficient
Smith, Don, Management Quarterly
Rural electric cooperatives (RECs) serve approximately 30 million persons in 2,600 counties of 46 states. Of the nation's 3,100 electric utilities, 934 are co-ops: 874 distribution systems and 60 Generation and Transmission (G&T) systems. The average REC has 9,400 consumers (meters) compared to 315,000 for investor-owned utilities (IOUs.) Municipal utilities (muni's) are the most numerous (nearly 2,000) and the smallest, averaging only 1,732 consumers. Co-ops have 8% of the industry's revenues and sales.
Residential sales amount to 59% of total REC sales, but only 35% for the industry. Nearly two-thirds of the industry's sales are commercial and industrial, but only 38% of REC sales.
Residential rates average 7.7[cents] per kWh for RECs, somewhat lower nationally than IOUs and higher than muni's. The commercial rate averages 7.4[cents] per kWh and the industrial rate averages 4.5[cents] per kWh.
Cooperative's density or consumers per mile averages 5.8, considerably lower than the IOU average of 35 and the muni average of 48.
As graph 1 shows, power costs average 4.5[cents]kWh and represent nearly two-thirds of total revenues of 7[cents]/kWh. Power costs have trended downward in recent years. Distribution costs, however, have increased from 2.1[cents]/kWh in 1985 to 2.3[cents]/kWh in 1990 to 2.5[cents]/kWh in 1995. Overhead costs are .7[cents]/kWh or about one-fourth of distribution costs. Operations and maintenance (O&M) costs have been fairly steady at .5[cents]/kWh. Fixed costs, comprised of interest, depreciation and taxes, have increased most to 1.0[cents]/kWh or 40% of distribution costs. Operating margins have remained stable at .3[cents]/kWh.
Assets and Equity
Assets of RECs total $62 billion. Equity totals $18 billion or 29% of assets for distribution and G&T combined, but 42% for distribution systems.
Co-ops overall serve areas of higher consumer and sales growth than other utilities. Graph 2 shows average growth in consumers of 2.7% in 1995, over double that of IOUs. Growth in kWh sales which fluctuates from year to year, was 6% in 1995 compared to 2.4% for IOUs (see graph 3.)
Capital Credit Retirements
Retirements of capital credits have increased substantially in recent years to over $300 million (see graph 4. …