The Cooperative Difference

I, along with our cooperative members, get many questions—not only about rates but what makes us different from large utilities, such as Public Service Company of New Mexico. New Mexico's rural electric cooperatives are different from investor-owned urban utilities in several key areas. This comparison emphasizes the main differences in their structures, operational strategies, rate-setting mechanisms, customer interactions, and community impact.

Electricity is a fundamental resource that powers our daily lives, yet its delivery and cost vary depending on where you live and who provides your service. Rural electric cooperatives and IOUs represent two models of electricity providers in the United States.

Cooperatives face challenges such as serving vast geographic areas with lower population densities. Southwestern Electric Cooperative, based in Clayton, serves 800 members in a service territory covering 4,882 square miles, including the counties of Harding, Quay, Union, New Mexico; Las Animas, Colorado; Cimarron, Oklahoma; and Dallam and Hartley, Texas. SWEC maintains 2,105 miles of electric distribution and transmission line, averaging less than one member per mile. Meanwhile, PNM’s 550,000 customers on 15,252 miles of electric distribution and transmission lines average about 36 customers per mile.

The number of cooperative members per square mile significantly impacts electric rates. In areas with low member density, the cost of providing and maintaining the electricity infrastructure per member tends to be higher, as the fixed costs of building and maintaining cooperative power lines, substations, and other infrastructure are spread over fewer consumers.

Electric cooperatives generally set rates to cover operating costs, debt service, and necessary reserves. Since cooperatives are not-for-profit entities, any revenue generated beyond traditional operating costs is reinvested into the cooperative or returned to members as capital credits. Investor-owned urban utilities set rates to ensure profitability and satisfy shareholders.

Capital credits represent a member’s share of the cooperative’s margins or profits, allocated annually based on their electricity purchases. Instead of immediate dividends, cooperatives allocate these credits to members based on their usage. Over time, these credits accumulate and are eventually returned to members—after a cooperative’s financial obligations are met—as a refund or credit on their bills. This system fosters member ownership and participation and ensures the cooperative remains financially stable while providing reliable electricity services.

Electric cooperatives are the backbone of rural America, as cooperatives play a crucial role in rural economic development by providing essential services and supporting local economies. They contribute to community resilience and stability by reinvesting revenues locally and promoting energy efficiency programs tailored to rural needs. Cooperatives also foster a sense of civic engagement among members.

Cooperatives are structured so that members who collectively own the cooperative have voting rights in business governance. The boards of directors are elected by their own members to govern the cooperative by establishing cooperative policies and ensuring financial sustainability. This democratic structure ensures decisions are made with the community’s interests in mind.

IOUs are typically large, publicly traded companies owned by shareholders serving large numbers of customers. They operate in urban areas where population density and economic activity can support their operations and investments. Decision-making is hierarchical, with corporate executives and a board of directors appointed by shareholders.

New Mexico’s rural electric cooperatives and IOUs represent two approaches to delivering electricity services. Cooperatives prioritize community engagement, member control, and service reliability, while investor-owned utilities focus on efficiency, innovation, and profitability. Both models provide reliable and affordable electricity to New Mexico, but their operational strategies and impacts differ significantly.

Understanding these differences is essential for policymakers, regulators, and consumers as they consider the future of energy infrastructure and service delivery in diverse geographic and economic contexts. Ultimately, your electric cooperative remains steadfast in supporting your rural communities, providing ownership and a voice in how your cooperative is managed, and striving to enhance your electric service at the lowest possible cost. That is the cooperative difference.