Co-ops beat utility rates in 15 states. But why not more?
Despite the fact that their customers are scattered throughout the most remote reaches of the 46 U.S. states they service, electrical cooperatives in 15 states offer residential rates lower than the averages for all utilities in those states.
A comparison of 1997 rates by the National Rural Electric Cooperative Association finds that another 24 states have rates that are just 1 to 10 percent higher than the utilities' state averages.
But shouldn't co-ops, which exist to provide at-cost service to their consumer-owners, be expected to offer rates in line with or better than those of competing municipal and investor-owned utilities in nearly every state they service?
That co-ops offer average rates lower than those of IOUs in certain states "should be a surprise to no one," says John Castagna, spokesman for the Edison Electric Institute. "Co-ops and munis are heavily subsidized by the government," he says. Castagna says this subsidy, an exemption from federal income taxes, amounts to more than $10 billion per year.
"IOUs, on the other hand, contributed $25 billion in taxes in 1996," compares Castagna. These tax breaks give co-ops an unfair advantage, he says, and should be expected to translate into low rates.
Dale Phariss, NRECA spokesman, sees no unfair advantage for co-ops. "[Co-ops] pay every tax that IOUs pay except income tax because they're not-for-profit," he says.