Competition among energy sources: how do the electric cooperatives rate?

• Author: Galing, Bernard W.

The possibility of a deregulated electric industry seems more certain every day. While much has yet to be accomplished to make deregulation a reality, many electric utilities view deregulation as a foregone conclusion and are taking steps to ensure that they can effectively compete in the new energy market place. During 1995, NRECA Market Research conducted over 33,000 interviews with residential members of electric cooperatives around the nation. A significant part of these interviews centered on co-op performance, customer satisfaction, and energy preferences -- factors which constitute a report card on the competitiveness of the rural electric cooperatives. This article will focus on the use of different energy sources and attempt to show how well the electric cooperatives are doing in making electricity the energy of choice. Survey data from 1995 will serve as the basis of this evaluation.

Given a choice between an electric cooperative, an investor-owned utility (IOU), and a municipal utility, it would seem logical that most co-op residential members would choose an electric cooperative as their electric supplier. Survey data clearly indicate that this is the case. Co-op members overwhelmingly (>70%) desire to receive their electric service from an electric cooperative. Only about 3-4% would prefer an IOU or a municipal utility. About 20% simply do not care from whom they receive their electricity. (See Fig. 1.)

To put these numbers in perspective, similar questions were asked of current customers of investor-owned and municipal utilities. While these responses only constitute a very small sample, the data suggest that these customers do not think as highly of their utility as do co-op members. For example, only about 50% of municipal customers would prefer to receive their electric service from a municipal utility. Interestingly, a sizable percentage of both types of customers (10-15%) would prefer an electric cooperative for their electric service.

What may not be surprising is that over 75% of IOU customers do not care where they get their electricity and would seem to show very little loyalty toward the IOUs. In terms of being competitive, electric cooperatives at least win the first battle -- they are the preferred service provider if the consumer has a choice.

As deregulation of the electric industry proceeds, there appears to be an increase in discussion about the energy market place instead of just the electric market place. As...