I read with interest the article in the October 2003 issue of Electric Light & Power by Mr. Kevin T. Williams, entitled, “Benefit of Counsel: The coop knee-jerk.” While Mr. Williams has some interesting points and opinions regarding generalizations about the boards of trustees of electric cooperatives and the national cohesion among cooperatives, he completely misses the broader benefit of the cooperative business model. Having myself worked on both the IOU and coop sides of the fence, I recognize what I feel is the most important difference between the two: the foci of the two types of organizations.
Certainly, some members of the boards of trustees of some cooperatives are motivated by a modicum of power and by modest perquisites. Compare, however, the power and perquisites of the boards of directors of investor-owned utilities. I would venture to say the per-diems, perquisites, and power of most IOU boards far surpass those of any cooperative. I can’t believe, however, that cooperatives’ board members are any more prone to self-preservation instincts than are IOU directors.
These issues, however, are trivial in comparison with the most compelling reason cooperatives resist takeovers by investor-owned utilities: service. While IOUs are consolidating operations, closing local branch offices, reducing workforces, shortcutting maintenance, and taking short-term looks at paybacks on investments, cooperatives are focusing on improving the quality of life of their members. They maintain district offices for the convenience of members in spite of the inherent loss of operational efficiency. They invest in the construction of new transmission in spite of the fact they can’t guarantee a high rate of return. They spend money to prevent outages. They invest in their communities, both financially and with intangibles (e.g., setting poles for the lights for community parks or school sports facilities). And they do all this with rates comparable to those of the IOUs in spite of the IOUs’ economies of scale.
In his article, Mr. Williams seems to have a mindset similar to what I experienced while working at an investor-owned utility. He comes across as believing that financial performance is the only important aspect of an electric utility. He doesn’t appear to understand why, when presented with an economic benefit to the acquisition of a cooperative by an IOU, the board of trustees does not jump at the chance. He attributes the “phenomenon” to self-interest or blind indoctrination of the members of the board.
Certainly, cooperative members for the most part are not concerned with the mechanics of the cooperative business model. Mostly when asked what they want, they respond with low rates and reliable service. They do not, however, want these things at the costs being paid by many IOU customers in terms of service, reliability, and convenience.
I’m very surprised that in his association with the Virginia, Maryland, and Delaware cooperatives that Mr. Williams did not come to understand that an electric cooperative focuses on service, not profit. Certainly it has to be able to survive economically; however, it does not have to provide an ever-increasing rate of return to its shareholders. In the “generous” buyout offers to which Mr. Williams referred in his article, who stood to gain the most? Was it the members of the cooperative and their level of service or was it the pocketbooks of the IOU shareholders? It seems to me that the only knees that were jerking were the ones jerking to the potential flow of cash.
Consolidated Electric Cooperative
Mount Gilead, Ohio
In his discussion “The coop knee-jerk” in the October 2003 EL&P, Kevin Williams suggests that actions of cooperative boards of directors are inconsistent with the interests of those they represent. I find this contention plausible, as it is consistent with my own observations. However, as is evident from recent events, this situation is not limited to cooperatives.
Mr. Williams indicates that IOUs declined to accept loans intended to electrify rural America. The story I heard was that IOUs were denied such loans.
John S. Ferguson
Re: October 2003 / Volume 81.10 – Electric Light & Power – Kevin T. Williams, Constipating Editor “The coop knee-jerk,” magazine disclaimer I am sure the magazine intended to state, “The opinions of Mr. Williams are his alone and do not necessarily reflect the opinions of EL&P staff or that of PennWell.”
I would hate to think that Mr. Williams’s drivel actually necessarily reflected the thought process of the EL&P staff or that of PennWell. Don’t you just hate those typos?
General Manager, Poudre Valley REA