Financial tool for competitiveness: the Cooperative Finance Corporation (CFC).

• Author: LaRochelle, Rich

We at the National Rural Utilities Cooperative Finance Corporation (CFC) believe that the strategic decisions made by directors of electric cooperatives in the next few years will be critical to the long-term success and visibility of the electric cooperative program. Directors will be called upon to make far reaching decisions that will position electric cooperatives for an increasingly competitive environment. We have no doubt that co-ops can compete and will succeed. But this success will require that the entire electric co-op family work together and build on our strengths.

Financing is the last thing your electric cooperative should have to worry about as the electric utility industry enters a period that many believe will result in profound changes. CFC is itself a cooperative - owned and controlled by the nation's electric cooperatives. CFC is also an $8.5 billion financing powerhouse with a solid "double A" credit rating. This credit rating is maintained year in and year out, based on the collective financial strength of electric cooperatives, the equity investments made in CFC by electric cooperatives and the strength that comes from the geographic diversity gained because CFC's members are located in every region of the country.

CFC exists only to serve electric cooperatives and to help you to be successful. You are CFC's only owners and your success is the sole focus of all of our efforts. CFC works to provide your cooperative with the lowest cost private capital and expert strategic services to assist your cooperative in positioning itself for the future. CFC's vision is to earn the distinction of being your most important financial partner.

What business is your cooperative in and what business should it be in the future? That is perhaps the first question that co-op boards should consider as the electric utility industry enters a period of significant change. This change will create both serious threats and enormous opportunities for electric cooperatives.

Nobody knows for certain what specific changes will evolve. Some cooperatives welcome the opportunities that restructuring could bring, while others strongly oppose these potential changes. Whatever approach your cooperative takes on the policy question of whether restructuring is positive or negative, inevitable or unlikely, CFC believes that it would be wise from a business perspective to take a "no regrets" approach and implement those changes that will make sense whether or not electric utility restructuring, along the lines already adopted by some states, is enacted in your state or by the U.S. Congress.

There are significant challenges in each of the traditional components of the electric utility industry and in each of these areas CFC is committed to working with cooperatives to find solutions that fit the unique needs of each cooperative.

GENERATION

This sector is rapidly becoming the most competitive segment of the electric utility business as there is a movement toward market-based pricing rather than traditional cost-based regulated pricing.

Wholesale power prices are being driven down, in part, by competition from lower cost non-utility generators. Utilities are preparing for competition by cutting costs, and, in the case of several generation and...