Thursday, December 18, 2008

NRECA Guidance to the USDA Rural Development Transition Team

Glenn English, CEO
National Rural Electric
Cooperative Association

Electric Cooperative Overview

The electric cooperative mission is to provide affordable and reliable electric power to our
42 million consumer-owners living in 47 states. We have no profit motive.
Electric cooperatives:
  • Cover nearly 75 percent of the nation’s land mass.
  • Serve about 12 percent of the population and are present in 2,500 of U.S. 3,141 counties.
  • Generate less than five percent of the nation’s electric power.
  • Maintain nearly half of the nation’s electric distribution lines.
Electric Cooperatives and USDA: A Long-standing, Productive Relationship

A 70-year partnership with the U.S. Department of Agriculture’s Rural Utilities Service
(RUS) makes it possible for cooperatives to construct and maintain their distribution and
generation systems – a difficult and expensive job. Cooperatives generate about half of the
power needed to serve our consumer-owners; the other half must be purchased on the open
market. RUS interest-bearing loans help make these worthwhile investments possible and
allow cooperatives to stabilize consumer rates.

As demand for power grows, RUS loans are critical for making sure adequate electric
infrastructure remains available and new, cleaner technologies can contribute to the
cooperative power supply portfolio. The low-cost RUS program compensates for the fact
that cooperatives are not eligible for more generous federal subsidies awarded to the
investor-owned and municipal utility sectors.

Electric Cooperatives and USDA: Partners on Rural Economic Development

Cooperatives partner with RUS to bring much-needed economic development to struggling
communities. Using the Rural Economic Development Loan and Grant program
(REDLG), co-ops have helped dozens of communities across the country establish and sustain industries, community facilities, and infrastructure. Program funds do not cost the
taxpayer, but instead come from early payments on RUS loans and other co-op
contributions. RUS administers the program while co-ops implement it by making zero-
interest loans and grants to eligible communities for projects that can create economic
sustainability. To date, REDLG has invested nearly $385 million in over 1,200 projects
across rural America while leveraging $2 billion in private funds and creating over 40,000

Unfortunately, previous Administrations and Congresses have frequently re-purposed
REDLG funds. These actions deny much-needed assistance to vulnerable communities and
turn back the clock on rural development.

Electric Cooperatives and USDA: Meeting the Renewable Energy Challenge

Cooperative-Owned Renewable Generation
Cooperatives are committed to using renewable generation and bringing it online where it
makes economic sense and improves the environment. However, it has been extremely
difficult for not-for-profit cooperatives to build our own large-scale renewable generation.
Cooperatives could not access lower-cost financing and tax credits that other industry
segments have used to construct these resources. 2008 Farm Bill adjustments to the RUS
program will for the first time allow significant lending for renewable generation. A large
group of electric cooperatives has formed a “National Renewable Cooperative
Organization” to allow cooperatives to plan, build and own large-scale generation for the
first time.

Renewable Energy Policies and Increasing Demand for Generation
Some renewable energy policies have unintended consequences for the RUS and electric
cooperatives, actually increasing demand for power and causing electric cooperatives to
buy or build more generation. For instance, intermittent wind generation requires back-up
generation, which is often natural gas. Rural areas host natural gas transmission lines.
Electric cooperatives are providing more electricity than ever to pumping stations along
these lines. And in the Great Plains states, many bio-fuels plants have chosen to locate in
electric cooperative service territory. Even when the human population is declining in
these areas, demand is growing robustly because of the plants’ large appetite for electricity.

USDA Renewable Grant and Loan Program
Electric cooperatives are continuing to make good use of the Rural Energy for America
Program (REAP), Section 9007 of the 2008 Farm Bill. This valuable program allows
farmers, ranchers and other rural enterprises to access loans and grants for the purpose of
improving efficiency or increasing renewable energy production. This program has
spurred many rural enterprises to perform energy audits or invest in new technologies such
as manure digesters. The current Administration’s proposed implementation rules would
emphasize loans rather than grants. The program has also historically received inadequate

In order to reach more communities and have a wider impact, this proven program should
continue to have a substantial grant component and the Obama Administration’s budget
should highlight the program’s effectiveness and value.

Interstate Transmission for Renewable Energy
A comprehensive set of federal policies and funding mechanisms are needed to ensure the
near-term construction of transmission that can handle increased demand. These policies
must, at a minimum, include a requirement that siting is performed through multi-state
regional planning and that rural consumers who are not using the power do not pay for the
new lines.

Electric Cooperatives and USDA: Rural Broadband Champions

President-elect Obama’s focus on broadband deployment is an essential component of
jump-starting our economy, especially in rural areas. Electric cooperatives have worked
for many years to bring broadband to rural areas that otherwise would have little chance at
connectivity. Through the National Rural Telecommunications Cooperative (NRTC), a
sister organization of NRECA, electric cooperatives have deployed “Wildblue” a satellite
broadband application, in dozens of communities. NRECA and NRTC look forward to
working closely with USDA, through its rural broadband program and other avenues, to
expand rural communities' access to broadband

1 comment:

  1. While the deployment relationship with WildBlue is laudable, it does not, and cannot because of the inherent nature of satellite internet, provide the targeted broadband services to rural America. The message latency associated with satellite service restrict applicability to services and applications which requrire only a limited amount of interactivity. This is mode of usage is applicable for streaming media, but fails in the dynamic web 2.0 messaging environment used by current generation applications.

    A better solution must be found.