by 
So you want to start an electrical cooperative for your home community as one person in Oracle is proposing as a solution to the limited and unreliable service received from SCIP? Good luck! The last successful electrical co-op began operations in 1989 on one of the outer islands of Hawaii.
One reason no new electrical co-ops have begun since then is that 99.98% of the U.S. has electricity provided by either an investor-owned, municipal or non-profit cooperative utility, and the remaining 0.02% is sparsely populated. Another reason is that the Rural Electrification Authority (REA) formed in 1935 to bring electric power to farming areas then ignored by urban utilities by providing subsidies and low-interest loans declared its mission completed and went out of business in 1994.
But starting a new electric cooperative is not impossible, said Tracy Warren of the National Rural Electric Cooperative Association (NRECA) based in Arlington, VA. To do so, the following steps must be taken:
Principle members must draft a charter designating their operation as a non-profit entity and establishes their service territory. The charter must specify that every person living within that territory is eligible to purchase electricity from the cooperative.
The cooperative should designate a management structure to run the cooperative as well as a board of directors to oversee the managers. Managers can receive compensation for their work.
To provide service, directors should establish a facility to either generate its own electricity or to pass on to its customers power sourced from outside providers. Employees skilled in electrical engineering to run the structure need to be hired.
To deliver the electricity, lines of sufficient capacity must be installed into all parts of the service territory. To run lines, directors must secure the right-of-way to run them over the property of others (SCIP could refuse to transfer their right-of-ways, Warren said). Lines are barred from archeology sites.
Once in place, the new electrical cooperative must be chartered by the Arizona Corporations Commission (ACC) to begin operations, said Steve Olea, director of the ACC Utility Division.
In the application, co-op management must present proof of a need for electrical service in their proposed territory. This will help set the legal service territory under ACC regulations.
A list of officers must be presented, along with their criteria for running a cooperative utility. A plan for providing service also is required.
And officers must present a financial statement to show they can remain financially sound. In getting started, electrical cooperatives must secure financial backing from local members and through bank loans and lines of credit. Although REA is no longer around to provide such support, similar help can be secured through the Rural Utility Service program of the U.S. Department of Agriculture. NRECA also has financial programs for electrical co-ops, although nearly all are aimed at helping existing co-ops upgrade their infrastructure to provide better service to modern customers.
Once ACC approves a cooperative’s charter, directors can then propose its rates for customers. Under Arizona law, ACC must approve rate proposals. An example occurred in 2014 when APS proposed putting a $50 monthly grid-connection fee on homes getting most of their power from rooftop solar systems, but ACC only allowed a $5 monthly surcharge.
Being a not-for-profit electrical utility, profits are not taken. Excess revenues accumulated by a co-op must go in a fund to be used for emergency repairs to the system.
One other interesting point to running a not-for-profit electrical cooperative that they receive fewer tax breaks than investor-owned or municipal electric utilities, NRECA’s Warren noted. The big guys have been lobbyists.
James J. Hodl is a career journalist who has worked for newspapers, magazines and trade journals. A graduate of Southern Illinois University with a Bachelor of Science degree in Journalism, Hodl began his career as a reporter with the Palatine (IL) Herald and the Morton Grove (IL) Review before becoming editor of the trade publication Appliance Service News. In recent years, Hodl has had articles published in Consumers Digest, Good Housekeeping, Home Remodeling, Kitchens & Baths and Salute; and has contributed to trade publications serving the home furnishings, restaurant and casino markets. A native of Chicago, Hodl relocated to San Tan Valley in 2013.
by by