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How do electric cooperatives impact the local, as well as the national economy - Essay Example

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The concept of the local cooperative that began in Rochdale England in 1844 has flourished in the US where electric co-ops have become a $29 billion business ("A 2005 Snapshot" 1,8). The rural cooperatives began to bring power to rural areas in 1935 under the Rural Electrification Administration (REA) and was later reorganized under the Rural Utility Service (RUS)…
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How do electric cooperatives impact the local, as well as the national economy
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Download file to see previous pages The electric cooperatives have raised the standard of living for millions of Americans and have contributed greatly to our gross domestic product.
Though electric cooperatives had operated sporadically since the early 20th century in the US, by 1935 electric power was available to very few US farmers. In the United States, electric cooperatives were established to bring electric power to rural areas that were not being served by the large public utilities. The large investor owned utilities saw this as a losing venture with few customers per mile of line ("A 2005 Snapshot, 8). However, by 1941, electric cooperatives were serving 35% of the nation's rural homes ("Historical Overview"). The immediate economic impact was to bring business, manufacturing, and commerce to areas that were previously dependent on agriculture and self-sufficiency. The introduction of electricity also placed an increase demand for electrical appliances such as refrigerators, washing machines, and radios. This has been extended to "Alaskan fishing villages, dairy farms in Vermont and the suburbs and exurbs in between" (NRECA). Today, the electric cooperatives in the US maintain 43% of the lines and deliver 10% of the nation's electric needs (NRECA).
While the impact on the national e...
They provide employment for 67,000 workers in the United States that contribute a payroll of $3 billion to the businesses and commerce of the local area of the cooperatives (NRECA).
In addition to providing a direct benefit for the people who are employed in the generation and distribution of electricity, there are also indirect economic impacts. Electric cooperatives supply their businesses through local purchases of the required resources. This can be anything from computers to vehicles. This money circulates back through the local economies and generates a ripple effect through the communities. Construction of major projects, though temporary, contributes a considerable financial input to a local area during the life of the project and can have a significant effect on the local economy (Schunk 5). The economic activity from these business transactions creates local jobs for service and retail businesses.
In addition to providing employment and stimulating the local economies around the country, the cooperatives contribute $1.2 billion in local, state, and federal tax revenue (NRECA). These revenues provide relief for the tax system and generate increased economic activity through the funding of federal infrastructure programs.
In addition to the direct input of tax revenue, the electric cooperatives receive a smaller federal subsidy than municipal and investor owned power companies. According to Lawrence R. Klein of the University of Pennsylvania, "...all types of utilities (Investor Owned Utilities (IOUs), Municipal Owned utilities and electric cooperatives enjoy some form of subsidy" (qtd. in NRECA). However, the lower subsidy received by the co-ops is substantial and may amount to as much ...Download file to see next pagesRead More
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