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Rural Electric Tries a Little English

Fortnightly Magazine - March 15 1996

have as long a period as possible to do their planning, to make their decisions and make sure those decisions are the proper ones and also, to make sure all the different possibilities are explored."

In other words, it could be a tough "election year." t

Joseph F. Schuler is associate editor of PUBLIC UTILITIES FORTNIGHTLY.

Co-op Snapshot

. About 900 electric cooperatives serve 12 million commercial, industrial, and residential customers in 46 states, excluding Hawaii, Rhode Island, Massachusetts, and Connecticut. Co-ops account for 7.4 percent of the kilowatt-hours sold and 5 percent of the electricity generated.

. Most co-ops provide electric distribution. Some generate and transmit electricity (G&Ts). There are 60 G&Ts. Rural systems generate 41 perdent of the electricity they sell and buy 34 percent from federal sources. About 25 percent comes from IOUs.

. Co-ops maintain nearly half the electric distribution lines in the United States. Yet, they average only 5.8 consumers per mile of line and collect annual revenue of about $7,000 per mile of line. IOUs, by contrast, average 34 customers and $59,000 per mile of line; publicly owned utilities average 46 customers and $71,000 per mile of line.

Source: The National Rural Electric Cooperative Association

Largest G&T Regroups to Serve Members

Oglethorpe Power Corp.'s 39 cooperatives may soon be free to buy wholesale power from the marketer of their choice.

Freedom doesn't come without its price, however. The plan would leave each cooperative with a share of Oglethorpe's stranded investment.

Even so, those pro rata costs enable the cooperatives to be more profitable, according to Dwight Brown of Cobb Electric Membership Corp., the largest cooperative in the Oglethorpe fold. In the first deal of its kind, an agreement between Oglethorpe and its members would be modified for incremental needs. The new pact is part of a restructuring of the $1-billion G&T, prompted by a planned "defection" about two years ago of six of its cooperatives.

A solution to the impasse came in July 1995, when both parties agreed on the assignment of stranded costs. December 1995 brought the reorganization announcement, plus an interim agreement that carries Oglethorpe members through March 31. Oglethorpe has agreed to supply power up until that date through Enron Power Marketing, Inc.

The interim agreement will reduce co-ops' wholesale power costs by several million dollars, according to Stan Hill, an Oglethorpe v.p. The cost savings vary by member. Oglethorpe will sell energy from its owned generation, then buy it back at a fixed price, which is where the savings come in. Enron's purchase arrangement includes an option to buy excess energy. The cooperatives still will deal directly with oglethorpe, but that could change as the reorganization takes shape and the contract evolves.

Oglethorpe hopes to have the principles of its reorganization established by the time the Enron deal ends. At that time the G&T would be split into separate generating, transmission, and systems operations companies. "What we're seeking to do is to change the setup so that the generation company will still be regulated by RUS," Hill says.

The other two companies,