Message From the CEO
There are many differences between electric cooperatives and investor-owned or public utilities—the most important being that a cooperative’s consumers are member-owners; they’re not just customers. Cooperatives like East-Central Iowa REC also follow a democratic process, while investor-owned utilities (IOUs) are owned by stockholders, and public systems are owned by the city, state, or federal government. They are for-profit entities, and only shareholders have any say in running the company. But with the cooperative business model, every member can make their voice heard. Every member can vote, and you have the right to participate in the policy-making process and elect the ECI REC Board of Directors. You take part in shaping our policies and influencing our business.
Unlike commercial utilities, cooperatives focus on service, not profits. We bring electricity to rural Iowa because for-profit electric companies are reluctant to serve areas where customers may be miles apart. In cities and towns, where homes and businesses are close together, power companies make more money per line mile. Cooperatives don’t ignore the need to make a reasonable profit, but we focus on our member-consumers because we exist to provide service.
Investors in commercial utilities put their money to work and expect growth to produce a return. Members participate financially in their cooperatives. When cooperatives produce a margin—revenue that exceeds the cost of providing service—it is reserved as capital credits. The reserves are used to build and maintain the cooperative’s infrastructure and facilities and provide for other service needs. At an electric cooperative, each member is allotted an amount of capital credits based on how much energy they use. This consumption is called “patronage.” When it’s deemed appropriate by the electric cooperative’s board, a portion of those capital credits may be paid to members, according to the cooperative’s bylaws. In other words, while investor-owned utilities return a portion of any profits back to their investors, electric cooperatives periodically issue patronage dividends.
Subject to law, our articles of incorporation, and our bylaws, the allocation and retirement of capital credits is at the sole discretion of the ECI REC Board of Directors. Your Board also follows a Board and Administrative Policy, which they developed for allocating patronage capital and retiring capital credits. The policy includes key objectives to allocate patronage capital and retire capital credits in a manner that:
- Is fair and reasonable to our patrons and former patrons.
- Provides ECI REC with sufficient equity and capital to operate effectively and efficiently.
- Protects ECI REC’s financial condition.
All this is to say that as a member of East-Central Iowa REC, you may have deferred patronage dividends coming your way. When you signed up to receive electric service from ECI REC, you most likely signed a membership agreement. You provide continuous capital by consuming and paying for electricity, which makes you an owner of ECI REC.
ECI REC members can rest assured your Board of Directors takes their fiduciary responsibilities very seriously and does a fantastic job guiding how your Cooperative’s money and assets are used to fulfill our mission. They do it all in ways that protect ECI REC and the interests of all our members.
ECI REC has been very fortunate to be able to retire deferred patronage for 22 of the past 25 years. This year was no exception. In June, current members who received electric service from ECI REC in 2006 and/or 2015 saw a line item on their bill called “deferred patronage dividends.” The amount of this line item was based on how much the member paid ECI REC for electricity used during those years. Former members received a check in the mail.
June was a busy month for your ECI REC Board of Directors. Not only did they retire patronage dividends, they held a virtual Annual Meeting of the Members, participated in the Cooperative’s strategic planning event, and wrapped the month up with their monthly Board meeting. If you see an ECI REC Director in your travels, tell them thank you and let them know they are doing a great job guiding the business of your Cooperative.