This is how West Oregon Electric Cooperative (WOEC) has been run for 75 years. Here’s why: As originally conceived, an electric cooperative is designed to run on low-interest government loans. An electric utility is a natural monopoly with a dedicated revenue stream, and thus the lender (taxpayer) is guaranteed payback. That’s why there are audits by the lending agencies. The expectation is that the entity will outlive its current management, board, and many of its members, but it must stay financially viable to serve members generations into the future.
The money must be borrowed; otherwise, it comes directly from the ratepayers, in what could often be an extreme bump to the monthly bill. There is no reason for a member to pay today for a substation or other system upgrade that is still going to be here and working decades from now. It’s unreasonable to ask members to fully pay for something today when they may not be here to use it in 10 or 20 years.
Things in a utility system constantly deteriorate and wear out, and are in need of replacement. New debt is brought on as old debt is retired. That’s how businesses work.
WOEC, like other rural electric utilities, accesses funding for capital investment projects through the National Rural Utilities Cooperative Finance Corporation, known as CFC, or through the U.S. Department of Agriculture’s Rural Utilities Service.
Running on a debt system is what makes the cooperative business model sustainable.
Understanding the Need for Debt Ruralite February 2019, Page 4