University of Wisconsin Center for Cooperatives

Electric Co-ops Gained Market Strength in 1996

Source: Electric Co-op Today, published by the National Rural Electric Cooperative Association. Article by Mike Sorohan, October 3, 1997. For further information, contact Dan Smith at NRECA, 703-907-5823.

Electric co-ops made strong gains in 1996, outperforming investor-owned utilities in nearly every category, according to an annual study by NRECA.

"Electric co-ops, on average, continued to perform well," said NRECA Chief Economist Don Smith. "Growth was strong and costs were down, enabling many co-ops to reduce rates and increase margins."

A record 850,000 Americans moved into electric co-op service areas last year, pushing the total number of people served by co-ops to more than 30 million, or 11 percent of the U.S. population. The top 150 co-ops in size accounted for nearly two-thirds of total customers added, mostly in the southeastern and western states. The average number of customers served by distribution co-ops grew to 9,700.

Sales of electricity increased by 6.5 percent, which is considerably higher than the IOU average of 2.3 percent. Residential sales increased by 6.7 percent as average use increased to a record 1,070 kilowatt-hours per month. Industrial sales grew by 8.7 percent, and commercial and industrial use increased to 36 percent of sales.

Despite the strong sales, electric rates declined overall. Residential charges dropped 2.2 percent on average to 7.53 cents per kilowatt-hour. Power costs in general dropped for the second straight year by 2.5 percent. Power costs totaled $11.2 billion, accounting for nearly two-thirds of the average electric bill.

The Times Interest Earned Ratio, a financial measure relating to a co-op's ability to earn annual margins sufficient to cover the margins sufficient to cover the interest charges on its total outstanding long-term debt, remained unchanged from 1996 at 2.40.

Co-op equity continued its solid growth. The average co-op gained nearly $1 million in equity during 1996, raising the average equity as a percent of assets to a record 43 percent. Investments in generation and transmission co-ops and associated organizations accounted for one-fourth of distribution equity.

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