Comparing Nonprice Terms in Utility
Filings Against FERC's Pro Forma Tariffs
AS ONE MIGHT EXPECT, THE VARIATIONS REFLECT THE HISTORIC TENSION BETWEEN NATIVE LOAD AND WHOLESALE...
1. Subordination of capital. Neither interest nor dividends may be paid on invested capital. Cooperatives provide for a return of capital-not a return on capital. Furthermore, neither the amount of patronage nor the amount of investment of a patron can determine such patron's degree of ownership or control of the organization, i.e., there must be patronage-based ownership.
2. Democratic control. Control of the organization must be vested in the patron-members and such control must be democratic. Democratic control is often expressed by the one person, one vote voting structure.
3. Not-for-profit operation on a patronage basis. The allocation of net margins must be made according to the patronage of the patron and not on the basis of such patron's capital balance.
4. Operation at Cost: A key element of cooperative operation is the notion of "operation at cost." "Cost" in the cooperative context is not to be confused with "cost of service" as generally used in utility ratemaking. Cost based operation for a cooperative is accomplished through the allocation of margins as capital credits (patronage dividends or allocations). The term margin is used by cooperatives in lieu of the terms "profit" or "net income" when referring to amounts earned on business conducted on a cooperative basis. 5 Income of a cooperative refers to all funds that flow into the cooperative because of its business operations. The term "earnings" is used to describe total income less expenses and must be distinguished from the more limited term, "margins," which describe earnings from business operated on a cooperative basis.