What's a Cooperative

• Cooperatives are owned by those who use the cooperative's service or products.  In the case of Cherryland Electric Cooperative, a member is the individual or business taking electrical service.  The member is the person(s) or entity listed on the cooperative's account records.
   
• Cooperatives are democratically controlled by their members.  In the case of Cherryland Electric Cooperative, members vote annually for candidates to serve on the Cooperative's Board of Directors.  Currently, seven directors serve on the Board.  The directors represent a mix of geographic specific ares as well as director-at-large seats.  Geographic specific areas include Grand Traverse, Leelanau, and Benzie-Manistee-Wexford counties.  The Cooperative General Manager, the highest ranking management position at the Cooperative, reports directly to the Board of Directors.  Additionally, directors approve annual budgets and establish cooperative policies.
   
• Cooperatives are not-for-profit businesses.  When revenue received from members exceeds expenses, the cooperative has generated "margins".  These margins, as opposed to profits, get assigned back to the members who were using the cooperative's products or services during the period the margins were generated.  At Cherryland Electric Cooperative, margins are assigned back to members on the basis of their proportionate share of energy used as measured in kilowatt hours.  For example, suppose a cooperative has ten members.  Each member uses the same amount of energy.  If the cooperative generated $1,000 in margins, each member will be assigned $100 in margins.  Suppose instead that of the ten members, one uses 50% of the energy and the remaining nine members use the other 50% in total.  The large individual member would be assigned $500 in margins while the remaining nine would each be assigned $55.55.  The process of assigning margins back to members is known officially as a capital credit assignment.  Some cooperatives prefer to use the term "patronage capital assignment", which means the same thing.
   
• Cooperatives strive to utlimately return cash to their members.  Each year as the cooperative generates margins, individual member margin accounts grow in proportion to their assignment which, as discussed, is determined by their proportionate usage.  From time-to-time, a cooperative board will decide to "retire" assigned margins.  When a cooperative retires assigned margins, individual members of record receive actual cash either in the form of a check or a billing credit.  At Cherryland Electric Coopertive, decisions to retire capital credits are based heavily on key financial measures like equity and lender requirements. 
   
• Cooperatives emphasize service.  Since cooperatives are not "in it for the money", they tend to instead emphasize member service.  Likewise, cooperatives tend to be smaller business entities which lends itself to more of a personal service touch.  Since cooperatives are not motivated by profits, emphasis can be placed elsewhere.
   
• Cooperatives support the communities they serve.  Typically, cooperatives support their communities in a variety of ways.  An electric utility like Cherryland Electric Cooperative pays substantial property taxes.  Cooperatives also give back through supporting community events through volunteerism and financial support.  Electric Cooperatives frequently use their monthly billing as an easy avenue for members to make charitable contributions by "rounding up" their bill to the next dollar.  The extra money is used to support food banks and other local assistance agencies.

To learn more about electric cooperatives, you should visit NRECA.org.