The value of a generation and transmission cooperative.

• Author: Byrne, Dick

From the beginning electric cooperative trustees and managers have recognized the great benefits that can be reaped from federating resources to improve service and reduce costs. NRECA, statewide organizations and CFC are examples of how very successful such efforts are. About 25 years ago groups of distribution cooperatives began forming Generation and Transmission (G&T) Cooperatives to federate their power supply and delivery needs. Investor owned companies had the cooperatives at their mercy by controlling their power supply costs and making it difficult to get new delivery points to reliably serve growing needs. By forming G&Ts, the distribution members were able to reduce power costs and improve diversity by collectively negotiating power supply arrangements and as the years passed by some building and operating their own plants. The success history of G&Ts is generally very good, but a few were not as fortunate as others. Those few undertook construction of their own plants during a period when, for the first time ever, load growth did not develop to provide revenues to pay for the new plant. And, to add insult to injury, interest rates and other construction costs rose sharply making the new plants so expensive that rates to pay for the plants were forced to be very high. Let me make it very clear that sound, prudent decisions, based on the known facts of the day, were made by the management and boards of the so called "troubled" G&Ts. As I am sure you are aware, two of the G&Ts have not been able to meet their construction debt obligations and have declared bankruptcy, while others are still struggling to restructure debt in some way that will lead to lower wholesale rates.

The vast majority of G&Ts have competitive rates and have reduced their rates in recent years by reissuing debt at lower interest costs and renegotiating contracts for power supply, fuel or other services.

When congress passed the Energy Policy Act of 1992, competition among electricity generators became a reality. Deregulation of the transmission of electricity means that producers will no longer be able to charge their costs plus a reasonable rate of return for producing a kWhr, but instead, will have to sell their electricity at a price the user is willing to pay for it. As a result, brand new types of suppliers have emerged known as a power marketers and power brokers. Both of these types of suppliers have been trying to break into the power supply market by...