[Colorado-Valley]

I've been fumbling around with the idea of co-ops. I'm concerned that energy supplies are now monopolized by large companies with strong, crony-style ties to government.

I'm afraid they will create "bottlenecks" that will keep energy prices so high that all of our discretionary income will be eaten up just trying to survive. And of course they will make huge profits in doing so.

At the turn of the century, populist farmers being taken to the cleaners by railroads and grain trusts started forming cooperatives, so that they could buy in bulk and also sell products direct to consumers without going through a monopolistic middle man.

That was called the "progressive movement," and it was able to help keep farmers from being put completely at the mercy of the robber barons of the age.

I wonder if there is any way that energy cooperatives with purchasing power could be organized to compete with the big energy companies. Maybe they would even spark innovation and efficiency for those who understand the danger of being powerless in an age in which power is everything.

My electric utility is a nonprofit rural electric co-op owned by us, the customers. It was formed as part of Roosevelt's New Deal. Our co-op raised our rates 5 percent last winter. A nearby private-owned utility raised theirs 37 percent.

Our co-op spends a lot of money helping customers save electricity so the co-op doesn't have to buy expensive peak power. It actually tries to help us customer-owners save energy, which is pretty amazing if you think about it.

So what do you think? Is there a place for co-ops in a peak-energy future?

[MrBill]

Sure, Co-ops have a long, illustrious history in rural areas. In the town I am from we have a grain co-op, lumber co-op, grocery co-op and of course a bulk fuel co-op as well as a caisse populare or credit union. They can be good, so long as they are not too small and therefore too inefficient with high fixed costs in the form of sales & admin costs that dilute savings that could be passed along to their members.

Also, good management is key. Small co-ops can have problems to attract the best people, so they may lack the expertise to wring more efficiencies out of the system than say their private counterparts. And of course in small organizations that are poorly run or badly monitored theft and fraud is also a worry for shareholders.

I have seen a lot of institutional paralysis when powerful interests in local organizations collide. It is hard to find best practice being implemented in these small organizations sometimes. Like closing down the local post office to save money. That is someone's job and you know them and their family. Still if they are loss making and no one is willing to spend a lot more to support the post office eventually it has to go.

In the short run you can cut costs and pass the savings onto your customers, but if your stakeholders do not let you invest properly in infrastructure, to keep costs down, then you will quickly find your infrastructure out of date, inefficient, and in need of repairs.

Co-ops have their advantages and disadvantages. Consumers are usually best served by having competition not replacing one monopolist supplier with another.

[gg3]

Mr. Bill basically has it on target.

I would add:

Competition is good in areas where it is possible, but it may not be possible, or better, in the case of energy suppiles in rural areas (or even in some urban areas). Remember, competing firms must spend more overhead $$ on sales and marketing. And investor-owned corporations also have an enormous regulatory burden to comply with, e.g. SEC rules, which is not the case with smaller privately-held corporations, co-operatives, and suchlike.

The major advantage of co-ops is direct grassroots ownership, whether employee-ownership or consumer-ownership. But yes you do have to attract good management and all the rest of it.

[garyp]

Worth reading parts of this interview.

[MrBill]

$this->bbcode_second_pass_quote('garyp', 'W')orth reading parts of this interview.