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What I’ve Learned About Co-ops

Most of my peers learned about cooperatives shopping
in late 1960s-style food co-ops filled with loaves of whole-grain bread, barrels
of beans, signs seeking volunteers to run the place, and of course, granola.

In my 20 years working for electric co-ops I’ve found
the food co-op model offers only the beginning of what it takes for a consumer-owned
utility to keep the lights on.

Here’s what I’ve come to think is important about
electric co-ops:

Co-ops are not government

A co-op is a private business under state corporation
law, owned by the people who use it. The myth that electric co-ops are government
may have developed because many co-ops originally got financing by borrowing
from the federal government’s Rural Electrification Administration.

Customers don’t run co-ops

The customers, or members, vote for the board
of directors. The board sets broad policy, and hires a manager to carry out
that policy. That manager hires a staff to do the work. There wouldn’t be much
electricity flowing if the co-op called a membership meeting for every decision
or relied on food co-op-style volunteers.

Not-for-profit means good service and good prices

Conventional wisdom dictates that the profit
motive provides high quality and low price. Another theory holds that a business
owned by its customers, with no motivation to produce ever-higher profits for
shareholders otherwise unconnected with the business, is only motivated to provide
its customers with the best possible service at the lowest possible price.

The Yardstick Principle

This theory says that because co-ops are motivated
by service and price for their customers rather than profits for shareholders,
they set the standard, or yardstick, for measuring the ideal price and service.
Some co-op business thinkers use the yardstick principle to argue that if there
were more high-profile co-ops in all our industries showing how good a business
could be, the resulting competition could mean less need for government regulation.
Profit-making companies would have to act more like co-ops, or go out of business.

Competition is a great motivator, and produces enormous
productivity. Cooperation also brings innovations that drive our economy, including
credit unions in financial services, affordable homes in urban areas through
housing co-ops, agricultural productivity and more rural lifestyle choices through
electric co-ops, and even healthier eating through food co-ops.

Paul Wesslund

Editor

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