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Are Electricity Co-ops Answer to Deregulation?

by Jules Saturday, Jan. 27, 2001 at 7:16 PM

Are electricity cooperatives the answer to deregulation?


Are Electricity Cooperatives the Answer to Deregulation?

Derek Alger is a freelance writer.

While Cassandra-like headlines about soaring electricity prices and rolling blackouts in California bombard the public, a group of leaders in the New York City housing cooperative movement has quietly, but effectively, been pooling its collective resources to enter the energy field.

1st Rochdale Cooperative, the country's first urban electric cooperative, began laying the groundwork three years ago. The electric cooperative prepared for energy deregulation by organizing housing cooperatives in New York City to purchase their own electricity.

Allen Thurgood, a leader in the cooperative movement for the last thirty years, founded 1st Rochdale. He envisioned it as lowering members' energy bills through comprehensive energy management, while also developing conservation strategies and renewable energy sources. He noted that it was created to protect the interests of residential consumers in light of federal and state mandates to restructure the electric utility industry.

The move seems to be paying off. The consumer-owned electric co-op is one of about nine companies in New York City currently supplying electricity to residential customers. It was singled out by the New York Post last summer as providing the lowest kilowatt price per hour of all the energy services companies certified with the Public Service Commission.

At the same time, 1st Rochdale has launched a pilot program with the help of the U.S. Department of Energy and the New York State Energy Research Development Authority. The program will install solar energy panels at two housing cooperatives with more than 2,500 families. 1st Rochdale also has plans to introduce localized, on-site generation from fuel cells and microturbines in New York City.

Conceiving a Cooperative

1st Rochdale was created to take advantage of the real opportunity to cut energy costs. Like California, New York State is moving toward energy deregulation. Customers of Con Edison -- the investor-owned utility with a long-time monopoly on New York City's electric service -- can now choose a new electricity provider.

The concept of 1st Rochdale, according to Thurgood, was based on his experience in the cooperative movement. Co-op members can purchase more collectively than they can individually, so why shouldn't this apply to energy as well? And, of course, he recognized that there are an estimated 1.5 million people living in housing cooperatives in New York City.

Thurgood's idea of an electric co-op was first greeted with skepticism and even ridicule. He pressed on. Eventually, he successfully presented his plan to the Coordinated Council of Cooperatives and other New York cooperatives.

But what to do next? Thurgood conceded that he didn't know the energy business, but he knew where to go to get advice and direction from the experts. So, members of 1st Rochdale approached the National Rural Electric Cooperative Association (NRECA) to learn the business. NRECA not only responded to the call, but also accepted 1st Rochdale in 1998 as the first urban co-op among its membership.

NRECA and its member cooperatives are actively involved in promoting national energy and environmental research. Statewide associations of the NRECA also provide a unified voice when addressing the general public, regulatory bodies and state legislators on behalf of its membership. NRECA represents almost 1,000 rural electric cooperatives and serves more than 30 million people in forty-six states. (In fact, the NRECA reports, close to half of all electric power lines in the United States are owned by electric cooperatives.)

Cooperatives at Home and Abroad

1st Rochdale is named after the town of Rochdale, England, near Manchester, where the roots of the modern cooperative movement can be traced. In 1844, a group of twenty-eight factory workers living in Rochdale sought to gain control over their economic destiny by forming a cooperative called the Rochdale Equitable Pioneers Society.

The cooperative in Rochdale was a success. In addition to opening a cooperative general goods store, members were able to buy in quantity and sell at low prices, thus, establishing the fundamental principles of modern cooperatives.

Cooperative businesses have been part of the American experience since at least 1752, thanks to Benjamin Franklin. Franklin, after living in Great Britain and seeing the growing role of "mutual" or cooperative societies there, helped create the first mutual insurance company, the "Philadelphia Contributorship for the Insurance of Houses from Losses by Fire."

Although Franklin is known as the father of American cooperatives, it was farmers who were largely responsible for the early development of cooperatives in the United States. The first farmer marketing cooperative was formed in 1804 by dairymen in the Connecticut River Valley, and by 1857, New York and Ohio both had enacted laws enabling cooperative (mutual) insurance companies to operate.

The ethical tradition of the Rochdale pioneers and their American counterparts was based on honesty, openness, social responsibility, and caring for others -- principles at which the contemporary cynic would probably sneer and say, "Give me a break."

But, as 1st Rochdale's founder Allen Thurgood argues, cooperatives are created in response to the needs of their members and operate solely for the benefit of their member-owners. As a result, co-ops provide goods and services to their members at reasonable and fair prices, and not to maximize profits, which is exactly what 1st Rochdale is trying to do on behalf of its customer-members in the electricity market.

While it appears, at least for the moment, that most New York consumers plan to stay with the giant Con Edison, 1st Rochdale is making inroads and optimistically hopes to capture 10 percent of the New York City market by the year 2005. Initially drawing on its base of housing cooperatives, 1st Rochdale is now signing up small and large apartment buildings, as well as businesses as customers.

Recently, 1st Rochdale also hooked up as a partner with the Touchstone Energy Alliance, the country's largest affiliated utility network serving families and businesses through member-owned cooperatives across the United States. There are currently over 560 Touchstone Energy Cooperatives in thirty-eight states, delivering energy and energy solutions to over 15 million customers everyday.

As New Yorkers settle down to cheer the Giants on against the Baltimore Ravens in the Superbowl in Tampa, Forida, power officials have advised residents of California who plan to watch the game on television to do it with friends to ease the power burden and avoid a potential blackout. Most football fans, not to mention other people, never envisioned such a problem. 1st Rochdale did, and that's why it hopes to expand its membership. It aspires to have more clout to provide essential electricity service, which too many, for too long, have taken for granted.

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We Need Electric Cooperative in California! C.E. Wednesday, Jan. 31, 2001 at 5:55 PM
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