Measuring Performance of America's Rural Electric Utilities: Are they Demonstrating the Cooperative Difference?

The purpose of this paper is to identify the key performance indictors (KPIs) reported by electric co-operatives in the United States. The research examines the extent to which the KPIs reported reflect the seven principles of... [ view full abstract ]

The purpose of this paper is to identify the key performance indictors (KPIs) reported by electric co-operatives in the United States. The research examines the extent to which the KPIs reported reflect the seven principles of co-operatives. Since electrical co-operatives were formed to provide electricity to rural areas that were largely ignored by for-profit electricity companies, historically, they did not focus exclusively on profit maximization. As these various electric co-operatives have grown and become more like investor-owned companies, it is important to demonstrate their co-operative difference. Furthermore, there has been an increased focus on wider non-financial reporting in many other sectors such as NFP and investor owned businesses.

Rural electric co-operatives began in 1935 when President Roosevelt established the Rural Electrification Act (REA). Prior to 1935, 90% of rural residents did not have electric service. The legislation facilitated the construction of utility lines to supply electricity at reasonable rates. By 1953, more than 90 percent of U.S. farms had electricity and currently about 99 percent of the nation’s farms have electric service. Most rural electrification is the product of locally owned rural electric cooperatives that got their start by borrowing funds from REA to build lines and provide service on a not-for-profit basis.

The methodology utilized for this research is comprised of a documentary review of non-financial information reported in annual reports along with semi-structured interviews with senior officials of electric co-operatives. The semi-structured interviews provide an opportunity to probe for additional information and explanation regarding the measures selected to reflect the seven principles and the co-operative difference. A convenience sample of small, medium and large-sized electric co-operatives were selected for this study.

Our preliminary findings show that while electrical co-operatives report a wide array of non-financial KPIs, they do not necessarily label them or link them with the seven principles of co-operatives. However, the researchers were able to correlate some of the KPIs with the seven principles of co-operatives. For example, the seventh principle ‘concern for community’ can be illustrated through reporting on social and environmental performance. While many electric co-operatives report KPIs regarding donations to community groups/charities, donation of staff time to community events, recycling and reduction of greenhouse gas emissions, they do not link them to the seventh principle.