At the dawn of the New Deal, only 5% to 10% of rural America had electric service. Franklin Roosevelt set out to electrify rural America by offering subsidized loans to investor owned utilities for them to expand their systems into rural areas. The IOU’s declined to accept these loans, however. (While the coops tend to paint this declination in a pejorative fashion, I think that the reasons are far more complex: please recall that FTC hearings into utility holding companies had begun in 1928, culminating in PUHCA and the mandated breakup of holding companies in ‘35, so the IOU’s were not disposed to cooperate with the government. There was also, of course, the depression, which discouraged investment.)

His original plan stymied, FDR changed tactics, and the result was the Rural Electrification Administration, formed under the USDA in the mid 1930’s. REA (recently renamed the “Rural Utilities Service” and charged with a somewhat broader mandate) began incubating electric cooperatives to provide electric service in rural areas. Whether selection of the cooperative business structure was motivated by expedience (which I think quite likely, as most people in rural areas were involved in farming and thus familiar with agricultural cooperatives) or a giant pinko conspiracy (which I think not), the simple fact is that the cooperative business form was utilized, and electric distribution cooperatives now supply electricity to three-quarters of this country’s land mass.

But that ground has shifted under the coop’s feet in those ensuing 60-plus years. Whereas once coops were all pretty much the same, now there are big systems and little systems; rural systems and suburban systems; high density systems and low density systems; rich systems and poor systems; systems with generation and transmission and those without; and so forth, plus a new wrinkle: around 200 distribution cooperatives have refinanced their subsidized loans and are no longer govermental borrowers. Nowadays, the only real commonality between these systems is that they all employ the cooperative business structure -- and this commonality is the cooperatives’ mothers milk of unity and thus political strength.

Electric cooperatives were borne of politics and owe the continued existence of subsidized governmental loans to their collective political strength. The cooperative’s trade group, the National Rural Electric Cooperative Association or NRECA, is one of the most powerful lobbies in Washington. NRECA has beaten back challenges to the rural electrification “program” by the Nixon, Reagan, Bush I, and even Clinton administrations. In order to do so, NRECA’s diverse membership had to be united, and the only unifying force seems to be the cooperative business structure.

The cooperatives gradually began to emphasize this common thread, and, over time, that emphasis has turned into a kind of fanaticism (indeed, I was recently contacted by a high-level executive of a large coop seeking anti-takeover advice, and he referred to the coops’ emphasis on their business structure as a “religion”). You can see the result of this fervent dedication of the web pages of virtually any cooperative and especially at www.nreca.org, the trade association’s site, which is liberally strewn with coop “information” (I was tempted to use a stronger term than that, but discretion prevailed).

Coop Board Directors are regularly treated to doses of NRECA “information” through state, regional and national meetings; educational programs leading to “Director Certification;” and a variety of publications hyping the coop business structure. Many Board Directors can recite the “Rochdale Cooperative Principals” by heart while not even recognizing the irony that electric cooperatives violate the first one -- that of voluntary membership.

Of course, a coop that is acquired by an IOU or financial buyer ceases to be a cooperative -- and the Directors, inculcated as they are (plus enjoying their power and perquisites, however, modest), cannot tolerate such a turn of events, ultimately valuing the cooperative business structure above virtually anything else. The result is ferocious opposition by most Board Directors to acquisition offers, no matter how generous.

Based on research performed on behalf of my clients and clear empirical data, the vast majority of cooperative consumer/owners or “Members” don’t care about the cooperative structure, voting for their Directors, attending annual meetings, or other affects of the cooperative business model. And please recall that it is the Members, not the Board, that must ultimately approve any acquisition.

Instead of being attached to a particular business structure, Members just want to get power at the lowest possible cost, and rely on their Board Directors to achieve that goal. Unfortunately, many Board Directors have lost sight of that mandate, subrograting it to the goal of remaining an electric cooperative, knee-jerks and all.

A version of this article originally appeared in Electric Light & Power magazine’s October, 2003 issue.