The Cooperative Difference

What is a cooperative? | Cooperative principles | Patronage Capital

What is a Cooperative?

The cooperative business is owned by and operated for the benefit of those who use its services. Excess profits, if any, are returned to the members proportionate with use. If electric service from LPEA is in your name, then you are a member and owner. This business exists to serve you, you have an economic interest and you have a voice in our future.

Cooperatives are a democratic form of business. Control of the co-op rests in each member having one vote. Members maintain control of the company by electing their own Board of Directors and voting on bylaws or other business issues. The elected board members, who must also be cooperative members, determine policy. LPEA members vote each fall to choose members for our 12-person board.

The birth of the modern cooperative movement is traced to Rochdale, England in 1844 and the organization of the Rochdale Society of Equitable Pioneers. A group of disgruntled weavers gathered because they were tired of high prices they were paying for poor quality goods. Each contributed a small amount of money to a fund, rented a building, bought supplies and began a business. This cooperative was a tremendous success because the people in Rochdale were able to consistently buy the goods they needed at a fair price.

Electric cooperatives in the United States were born out of President Franklin D. Roosevelt’s New Deal to bring the U.S. out of the depression.

Part of the New Deal was the creation of the Rural Electrification Administration (REA) in 1935. This Administration was granted the authority to loan money and provide expertise so that rural America could be electrified.

In 1939, a group of forward-looking southwest Colorado leaders took advantage of REA financing and incorporated La Plata Electric Association as a cooperative business, forever changing our area.

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Cooperative Principles

The following seven guiding principles assure that cooperative don't lose focus on serving their members and communities.:

1. Voluntary and Open Membership — We are a voluntary organization, open to all persons who have electric service in their name, without gender, social, racial, political, or religious discrimination.

2. Democratic Member Control — We are democratically controlled by you, who actively participate in setting policies and making decisions. Elected representatives are accountable to you.

3. Members’ Economic Participation — Members contribute equitably to and democratically control LPEA’s capital. When conditions permit, you receive refunds on capital subscribed as a condition of membership.

4. Autonomy and Independence — We are an autonomous, self-help organization controlled by you. If we enter into agreements with other organizations, including governments, or raise capital from external sources, we do so on terms that ensure your democratic control and maintain our cooperative autonomy.

5. Education, Training, and Information – we provide education and training for our members, elected representatives, managers, and employees so they can contribute effectively to the development of your cooperative. we inform the general public, particularly young people and opinion leaders, about the nature and benefits of cooperation.

6. Cooperation Among Cooperatives — We serve our members most effectively and strengthen the cooperative movement by working together through local, national, regional, and international structures.

7. Concern for Community — While focusing on member needs, we work for the sustainable development of our communities through policies accepted by our members.

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Patronage Capital

Each year, the amount of electric payments above and beyond the cost of providing electric service (the margin) goes into a patronage capital account (also referred to as capital credits) in each customer’s name, in proportion to the customer’s usage. This capital, along with borrowed funds, can be used to finance improvements such as electrical lines, poles, transformers and substations. In other words, LPEA invests the margins earned by each owner back into the system to help build owners’ equity and reduce the amount of money the Association has to borrow (thereby reducing interest charges). This allows LPEA to maintain system reliability at its highest level and still keep rates low.

Patronage capital refunds are the method by which electric cooperatives return some of the excess capital to the members/owners. When times are good and certain equity requirements (set by the Rural Utilities Service mortgage agreement) are met, the LPEA Board of Directors determines the amount of capital (if any) to be refunded. Refunds are typically a combination of the following: 1) 100% of the Patronage Capital for the oldest years patronage capital is on the books; and 2) A percentage of the total remaining Patronage Capital in proportion to a customer’s usage. This percentage has historically been between three and five percent. The percentage is determined by factors such as cash flow, equity requirements, financial stability and cash needs for future construction. Balancing these factors ensures that LPEA refunds the maximum amount while keeping adequate operating cash on hand and keeping owners’ equity up to certain minimum levels.

Refunds show up as a credit on the electric bills of most members. However, members with refunds over $250.00 and members with inactive accounts receive refund checks.

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