Electrification: Rural America

The process of extending central station electric service through a network of transmission and distribution lines to make electricity readily available for use where needed. This article describes the difficult task of electrifying the vast rural areas of the U.S. It was accomplished by a unique partnership between the U.S. Government and member-owned electric cooperatives, coupled with creative design and cost-cutting innovations. Today the combined cooperative utility system, with over two and a half million miles of line serving 40 million people in 47 states—in some of the most sparsely populated areas of the country—can be viewed as the nation’s largest electric utility network. Cooperative rural electrification makes significant contributions to rural economic development, energy research and international rural electrification.

Rural America’s Dark Days

Continuous, dependable electric service is taken for granted today in the U.S., even in the most remote areas. Yet, in the 1930s, tens of millions of rural people and 90 percent of farms lived without electric power. For rural people, these were the difficult years of the Great Depression. Many farm families, unable to scratch out a living, abandoned their farms to seek jobs elsewhere. Those who remained yearned for the luxury of electricity so that they could discard the kerosene lamp, the wood stove, washboard, and the outdoor privies. They needed electricity to have hot and cold running water and refrigerators like people living in the cities, and to power milking machines, welders, grinders and dozens of other productivity improving machines.

Rural Electrification Administration

Such were the conditions when President Franklin D. Roosevelt signed Executive Order 7037 to create the Rural Electrification Administration (REA) under authority of the Emergency Relief Appropriations Act of 1935. A year later, the REA was made a permanent agency when Congress passed the Rural Electrification Act of 1936. It set in motion a partnership between the federal government and rural people that changed the face of rural America and greatly improved the living conditions and productive capability of farms and rural businesses.

The legislation authorized loan funds to implement the program. Existing electric utilities were challenged to carry out the task, but, except for the more densely populated areas, there was little interest. The REA, however, was committed to the Area Coverage Principle, a goal of providing affordable, reliable, central station electric power to all farms and rural people, regardless of location. Morris Llewellyn Cooke, a progressive engineer who studied power distribution costs, was appointed to head the new agency and find innovative ways to make the program work.

Thus, from its very beginning, the electrification program was the product of creativity, innovation, experimentation, and a firm belief that great things happen when dedicated people work together for a common goal. The REA Administrator Cooke believed that electric utilities could be established and operated on much the same basis as the successful non-profit, farmer-owned cooperatives. Rural people could be trained, with REA staff help, to oversee the management, construction, and operation of their memberowned rural electric cooperatives.

There were few patterns to follow. Those few farms that had electric service were usually close to existing utility lines running between cities and towns. There were some examples of small groups of farmers who formed cooperatives to buy electricity from utilities, and there were a few utility test lines that provided important information on feasibility and economics of farmstead electrification for future electric use projections.

One such test line was located at Red Wing, Minnesota. It consisted of about six miles of line to connect 20 farmsteads in a prosperous dairy community. A similar study was carried out in 1924 at the 8.4- mile Renner Test line serving 17 farms (mostly dairy) near Sioux Falls, South Dakota. Both studies revealed that, given the opportunity, farmers would use increasing amounts of electricity profitably to increase production.

Cost-cutting Innovations

Line construction and operation costs had to be kept to a minimum to make electricity affordable when a mile of line might serve only one or two consumers compared to 20 or 30 for city electric systems. The REA engineering staff redesigned and standardized singlephase lines for rural utilities. Huge cost savings resulted from innovations and redesign of virtually every aspect of electric utility operation. This included eliminating cross arms, increasing primary distribution voltages, extending distance between poles, implementing production line construction techniques, and having consumers read their own meters.

Another segment of the REA staff was charged with developing ways to train electric cooperative managers, technical and administrative staff, and directors. A field organization was established to advise the fledgling electric cooperatives in everything from organization and engineering to rate structures and financial matters. The goal was for each electric cooperative quickly to become self-sustaining.

The program worked well, and the idea of using non–profit cooperatives as the business entity to extend electric service was a success. That success, coupled with the pledge of Area Coverage, stimulated increased activity in the more remote, unelectrified areas. Men and women, potential future members, canvassed their neighborhoods and urged others to sign up and pay the $5.00 membership fee, to get electricity during the next phase of construction, or of organizing a new electric co-op. Appliances often were purchased long before the lights came on. It was estimated that co-op members spent $4.00 on appliances, electrical equipment, and wiring for each dollar spent on line construction.

Construction was slowed to a virtual halt when U.S. involvement in World War II demanded sacrifices including all available material. Electrification was recognized for its labor-saving role and for increased food and fiber production desperately needed for the war effort. “A one horsepower electric motor can do the work of eight men,” read a poster that urged farmers to make effective use of electric power.

Post-war Electrification

Cooperatives’ success in electrifying rural areas during the pre-war years set the stage for expanded, dynamic post-war electrification efforts driven by the demand from farmers and returning veterans. At war’s end, 43 percent of the farms in the U.S. remained unelectrified. The Area Coverage principle was more important than ever. Loan funds were made available through the REA to finance construction. There were major problems involving the shortage of materials and trained staff. But by 1948, more than 40,000 consumers per month were connected to consumer-owned rural electric lines. By June 1949, more than 78 percent of U.S. farms received central station electric power; the remaining 22 percent were more difficult and costly, and took considerably longer to electrify.

Rural Electrification Today

As a group, the electric cooperatives can be viewed as the nation’s largest electric utility network. Nearly 900 rural electric distribution systems with a total of 65,000 full-time employees provide power to nearly 17.5 million meters (farms, residences and businesses—over 40 million people) in 47 states. These electric cooperatives own and operate approximately 42% of the distribution line in the nation (two and a half million miles of line) to serve only about 12 percent of the nation’s population. Rural electric lines extend into more than 2,500 of the nation’s 3,141 counties, over difficult terrain including swamps, mountains, and deserts.

Nearly 90 percent of the cooperative connections are classified as residential (farm and non-farm). In contrast, other segments of the utility industry enjoy a mix, about one-third each of industrial, commercial, and residential loads, which gives them more revenues and better load diversity resulting in lower demand relative to revenues. Rural electric systems have an average density of only 7 consumers per mile of line compared to the investor-owned utility average of 35 customers per mile of line and about 47 per mile of line for city-owned systems (municipals). Annual revenues from electricity sales for co-ops is about $10,500 per mile of line compared to $62,700 per mile for investorowned utilities, and $86,300 for municipals.

Because the not-for-profit cooperative utilities are locally owned and controlled by the people they serve, they are uniquely qualified, and often called on to provide leadership and technical assistance in business development and other community services such as rural housing, rural water and sewer systems, telecommunications and home security systems, and economic development activities.

In spite of obstacles, by working together, rural electric cooperatives have matured and evolved into a cohesive, important, and influential segment of the U.S. electric utility industry. Their success, as a group, has been enhanced by pooling their resources and efforts through service cooperatives such as generation and transmission cooperatives, statewide associations, purchasing and marketing organizations, financing cooperatives, and their national association.

Generation and Transmission Cooperatives

Building distribution systems was difficult, but securing the wholesale power to meet new demands for electricity was an even greater challenge. Initially, rural electric systems purchased wholesale power from many sources investor-owned and municipal utilities and federal power sources such as the Tennessee Valley Authority (TVA) and Bonneville Power Administration (BPA).

Ultimately, rural electric systems needed to develop their own power sources. They did this by forming generation and transmission (G&T) cooperatives to provide power to member utilities on a state or regional basis. Currently rural electric systems generate 43 percent of their power needs through their G&Ts. The balance is purchased from investor-owned electric utilities (28 percent) and from federal power agencies and other public power sources (27 percent).

The 66 G&T cooperatives serve 670 member systems. They provide power to their members by generating from their own plants and purchasing power from other utilities. G&Ts currently own 45,000 MW of generating capacity from which they generate nearly 5% of the nation’s electricity. They own and operate most of that capacity themselves but also have joint ownership and other arrangements with IOUs and publicly owned utilities. Most of the G&T owned capacity is coal-fired comprising about 80% of their total generation. As a group, these coal generating plants are environmentally the cleanest in the industry with 44 percent using modern flue gas scrubbers compared to 20 percent for the industry nationwide.

From their early days, G&T co-ops were active in technological development, and were first, or among the first in many pioneering efforts, as suggested by the following examples. First, the United Power Association in Minnesota (now Great River Energy), in partnership with the U.S. Government, constructed, successfully operated, and safely dismantled a small (23.8- megawatt) demonstration nuclear power plant. Additionally, Associated EC in Missouri demonstrated and tested a 200- kilowatt phosphoric acid fuel cell power plant for possible use with landfill gas. Second, Alabama Electric Cooperative (now PowerSouth) built and operated the nation’s first compressed-air energy storage power plant to provide 110 megawatts of intermediate and peaking capacity. Third, Basin Electric Power Co-op in North Dakota built and operated a plant that produces natural gas from lignite coal and uses the fines from that coal to generate electric power. Fourth, Buckeye Power Inc. in Ohio was a leader in curtailing power costs by reducing demand with use of electronic controls to cycle the operation of residential water heaters and air conditioners. And fifth, Colorado-Ute (now Tri-State) repowered and upgraded an obsolete 36-megawatt coal-fired plant to a highly efficient 110-megawatt circulating fluidized bed combustion power plant for a significant advance in clean coal technology.

Statewide and Service Organizations

Electric cooperative leaders throughout the country recognized the need for coordinated support, legislative efforts, and additional services that the individual electric systems could not do as well by themselves. They organized statewide associations to carry out these functions. Currently, there are 36 statewide organizations serving 38 states; 32 of these publish magazines that reach 9.2 million households and more than 22 million readers each month. There are 37 service organizations that member rural electric systems use to pool orders for purchasing electric materials and services.

The National Rural Electric Cooperative Association

The National Rural Electric Cooperative Association (NRECA), the national service organization for cooperative electric utilities, grew since its formation in 1942 to an organization of more than 600 employees providing national representation, programs and materials for its more than 900 member systems. NRECA was initially organized to assist member systems with national problems including securing employee insurance at reasonable costs; protecting them against threatening wholesale power and legislative issues; and breaking the bottleneck for much-needed line construction material.

NRECA now provides national leadership and member assistance in legislation, legal and regulatory issues, communication, energy policy, education, research, technology, conferences, insurance and financial services. Its programs are financed by dues and fees for services. The NRECA headquarters is located in metropolitan Washington, D.C., at 4301 Wilson Boulevard, Arlington, Virginia. Two major publications of NRECA are R E Magazine, published monthly, and Electric Co-op Today, a weekly news publication that reports on activities and views about electric cooperatives.

Cooperative Research Network

The creativity, innovation, and experimentation of the early days of rural electrification continue through NRECA’s Cooperative Research Network (CRN) program. Funded by voluntary contributions from NRECA member systems, CRN conducts comprehensive research and development projects to address the unique needs of rural electric systems. By pooling their research dollars, cooperatives conduct significant research far beyond the financial means of individual systems. As members of the utility industry’s Electric Power Research Institute, they often leverage available funds as much as 10 fold. CRN’s current annual budget for research is about $4.5 million.

Several hundred research projects have been funded ranging from major 110-megawatt compressed-air energy storage and fuel cell power plants to pre–pay electric meters and new concepts in delivery of electricity. New electricity application projects include agricultural electrical equipment, energy conservation and efficiency publications, and design and market development of closed loop/ground source (geothermal) heat pump systems and electric thermal storage heating equipment.

International Programs

On November 1, 1962, NRECA signed its first contract with the U.S. Agency for International Development (USAID). The purpose was to export America’s model of rural electrification to developing countries. Since then, 250 electric cooperatives have been formed in 14 developing countries. Today those overseas cooperatives bring electricity to more than 34 million people.

NRECA currently provides technical and management assistance in 9 countries, creates cooperatives and other decentralized utilities, carries out extensive training programs, and introduces renewable energy programs (solar, wind, biomass and hydropower). The International Programs Division is totally self-supporting with funding from service contracts with organizations such as USAID, World Bank, and overseas governments and cooperatives.

In addition, the charitable arm of the organization, the NRECA International Foundation, is actively engaged in shipping donated electrical equipment and carrying out volunteer-assisted projects to electrify rural and remote areas of many countries. A sister cooperative program pairs utilities from the U.S. and overseas in a voluntary exchange of ideas, equipment and training. The Foundation funding comes from individual and corporate voluntary contributions.

The REA Becomes the Rural Utilities Service (RUS)

Electric co-ops no longer need, and the REA no longer offers, many of the services provided during the program’s formative years, but they still need the REA’s stable source of loan funds. The Rural Utilities Service (RUS) is a new agency created in the 1994 restructuring of the USDA. With that action, the REA became the RUS. Its responsibilities were expanded to include rural water, sewer, electric, and telephone programs.

The RUS is now one of three agencies, along with rural housing and community development and rural business and co-op development, that make up the new USDA Rural Development. Co-ops also are eligible for RUS loans to establish water and wastewater services for low-income areas to help resolve health and sanitation deficiencies, telecommunications, and distance learning and telemedicine (http://www.usda.gov/rus). Wally Beyer, former manager of Verendrye Electric Coop, Velva, North Dakota, was appointed the first RUS administrator.

The National Rural Utilities Cooperative Finance Corporation (CFC)

Because of the need for additional funding to supplement the REA loan program, rural electric cooperatives developed and organized the National Rural Utilities Cooperative Finance Corporation (CFC) in 1969. The CFC was organized as a cooperative, provides a source of private market financing, and offers a full range of financial services and programs to its more than 1,000 member systems and affiliates.

CFC offers full-service financing, investment, and related services to its members, and offers a wide range of flexible, low-cost financing programs and interest rate options. It raises funds for loan programs with the support of its owners’ equity and investments and through the sale of multiple financing vehicles in the private financial markets. By maintaining high credit standards and credit ratings, CFC delivers superior quality products at a reasonable cost.

CFC also offers flexible ways for members to invest surplus cash to earn additional revenue while helping keep the cost down for all members. Other specialized services can help co-op executives make better business decisions.

Overall policy is set by a 23-member Board of Directors (CFC Extranet link), representing 10 geographic districts and the National Rural Electric Cooperative Association (NRECA), the network’s national trade association. CFC’s Board is democratically elected and consists of both cooperative utility directors and managers.

CFC manages and funds the Rural Telephone Finance Cooperative (RTFC), an organization that provides financing to the rural telecommunications industry. CFC also manages and funds the National Cooperative Services Corporation (NCSC), an organization that provides electric cooperatives with specialized financing services that supplement the financial services of CFC. With a full-service approach, CFC is committed to providing its owners with timely and reliable financial and business management solutions in a complex and changing utility environment.

Related Nonprofit Service Organizations

Several additional non–profit service organizations have an important role in the electrification and development of rural America. For example, the Banks for Cooperatives provide some loans to electric cooperatives. The National Rural Telecommunications Cooperative was formed to foster development and growth of satellite technology in rural America. The National Telephone Cooperative Association supports rural telephone cooperatives. The Western Fuels Association provides coal for consumer-owned utility power plants. The National Food and Energy Council specializes in agricultural electrical technologies and issues in support of member electric utilities. The Electric Power Research Institute pools research funding from all segments of the utility industry to carry out research of interest to its members. All of these organizations contribute to the success of the electric cooperative network (Brown et al. 1990).

— Lowell Endahl, Robbin Christianson, Erick Gibbs, Eleanor Miller, Dave Olivier, and Matt Rhoades

See also

Cooperatives; Development, Community and Economic; History, Rural; Infrastructure; Public Services; Quality of Life; Technology

References

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