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Dennis Hill

Co-op principles basis for business model

By Dennis Hill

Ever since 1930, not-for-profit cooperatives of all kinds have recognized October is Co-op Month, as a way to educate the public about how co-ops work and what makes the business model special.

It’s unique because cooperatives are guided by these seven principles:

No. 1: Voluntary and open membership
Co-ops are open to anyone who is able to purchase its products or services. For electric cooperatives, that means any person who moves into a territory served by an electric cooperative and completes the necessary membership agreement can become a member.

No. 2: Democratic member control
Democratic member control means members vote for a director who represents them on a board which governs the cooperative. These elections take place at an annual meeting, where the members are also updated on the business matters of the cooperative.

No. 3: Members’ economic participation
Because an electric cooperative is owned by its members, it does not create profits for distant shareholders. Any excess revenue — called margin — is allocated back to the membership in the form of capital credits, or patronage capital. Over time, these capital credits are retired and then paid back to members each year based on a percentage of electricity purchased from the cooperative.

No. 4: Autonomy and independence
Electric cooperatives form a vast network across America. They’re found in 47 states, and cooperative-owned electric lines cover 42 percent of the nation’s land mass. But what’s unique is that each cooperative is an autonomous, independent business controlled by its members.

No. 5: Education, training and information
Cooperatives have a charge to keep their members informed — not just about cooperative business, but also about topics like energy efficiency, safety and community contributions. For example, North Dakota Living and its eight pages of local cooperative content is one way electric cooperatives keep members informed about the business matters of their cooperative. Most co-ops also post information on their website or Facebook page.

No. 6: Cooperation among cooperatives
Even though co-ops are independent entities, they still rely on one another to share resources, information, and in some cases, personnel. For example, electric co-ops have long relied on one another to get power restored more quickly after severe weather emergencies.

No. 7: Concern for community
This principle drives electric co-ops to be good stewards of the communities they serve. While the core business is the delivery of safe, affordable electric power, electric cooperatives take seriously the task of supporting and contributing to the development of the communities in which they live and work.

These seven principles make up the foundation of our business model. By believing in them and practicing them, being a cooperative isn’t just a word. It is indeed a way of doing business, and a special one at that.

Dennis Hill, editor-in-chief of North Dakota Living, is executive vice president and general manager of the North Dakota Association of Rural Electric Cooperatives, Mandan. Comments can be mailed to Dennis Hill, NDAREC, P.O. Box 727, Mandan, ND 58554-0727 or by email to


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