Members still control co-ops under deregulation

Electric utility deregulation is one of the most important public policy issues facing our nation. I am pleased to say that Illinois' House and Senate members took up the challenge of electric utility deregulation and passed legislation that will protect the rights of cooperative members. Language in the bill guarantees the right of co-op members to choose the future course of their locally owned, not-for-profit utility.

Electric utility deregulation is a very complex issue and the debate involved over 80 different interest groups. The bill is 262 pages long, and is extremely technical and complex. However, the part that pertains to electric cooperatives and municipal utilities consists of only five pages. It is probably the only language in the legislation that received support from almost everyone involved in the process, including consumer groups, unions, farm organizations and other utilities.

Earl Struck

Work to include language that would protect the rights of cooperative members began over two years ago. Electric cooperative leaders from across the state spent long hours hammering out differences and details. Their hard work resulted in a set of guiding principles that was adopted by the Association of Illinois Electric Cooperatives' (AIEC) board of directors.

The guiding principles approved by the AIEC board were quite simple and to the point. I believe members of the Illinois General Assembly, and all parties to the debate, understood the simple honesty and integrity of these principles, and the men and women who recommended them. Our success has always been based on the positive and honest reputation of our members and the electric cooperative program they represent.

Briefly, the principles supported deregulation so long as it ensured benefits to all electric co-ops and their members and guaranteed adequate and reliable service to all present and future members. The first principle states that cooperative participation in deregulation should remain at the discretion of each individual cooperative. The second principle supported the Electric Suppliers Act which prevents unnecessary duplication of electric lines, adverse environmental impact, taking of farmland, and other unnecessary social costs. Finally, the most important principle was that regulation of electric cooperatives should remain in the hands of the local members.

Under this legislation, electric cooperatives and the other not-for-profit utilities in the state, the Illinois municipal utilities, will have three options.

One is to keep the status quo. This could actually be the best option for the majority of customers served by some cooperatives and municipal utilities. For example, no out-of-state power marketer could come in and take a valuable industrial customer away and leave the remaining customers to make up the difference in lost revenue.

The second choice is to go ahead and enter the deregulated market. However, if the cooperative or municipal utility's customers want to make this change, they can do it under the terms, conditions and timetable that is best for their own unique circumstances. This is important because no two cooperatives are identical. However, if a cooperative or municipal utility enters into the deregulated market, then other suppliers will be able to come into their territory and market electricity in return. This is called reciprocity. The cooperative or municipal would risk losing important large customers, but could gain new customers. Again, under the Electric Suppliers Act, distribution of that power would still be provided by the local utility.

The third option is a hybrid of the first two. For example, the cooperative or municipal utility could decide that it is not in the best interests of its residential customers to fully enter the deregulated market. There could be

Earl Struck is president/CEO of the Assocation of Illinois Electric Cooperatives (AIEC). AIEC is the state trade association for all 28 Illinois electric cooperatives.

4 ILLINOIS COUNTRY LIVING JANUARY 1998

strength in numbers for the co-op's residential customers on the open market. However, in the interest of local economic development, job retention, or some other reason, it might be wise to authorize an industrial customer, or customers, to shop for wholesale power on the open market.

Deciding which option to take will be very difficult. But I believe it is always better to make decisions like this as close to home as possible. Cooperatives and municipal utilities are not-for-profit utilities established by and for the local citizens they serve. These decisions will not be decided by the Illinois Legislature, the Illinois Commerce Commission, or the U.S. Congress. They will be decided by you, the members.

This is a very complicated issue and I urge you to ask questions. Attend your cooperative's annual meeting or area meeting. Let your local board of directors know what you think is the right direction.

Editor's note: At press time the deregulation bill was awaiting the action of Governor Jim Edgar.