CO-OPs Do One Thing

It appears that one area of our industry may be recession-proof indeed: co-ops.

This week, the National Rural Utilities Cooperative Finance Corp. announced results from its annual key ratio trend analysis (KRTA) report that keeps an eye on the wallets of distribution cooperatives across the country. Low and behold, this year’s results show cooperatives that are strong and holding steady, even amidst the gloom and doom newscasts lamenting the demise of consumer confidence, the evils of the job market and concerns that the stimulus moola has been a waste.

The KRTA report is based on data submitted by 819 distribution cooperatives for the year ending Dec. 31, 2008. The report had three major findings.

1.) Revenues at co-ops kept up with fuel issues last year, indicating that, indeed, fuel adjustments and rate increases are being used more often, keeping the co-ops healthy.

2.) Financial ratios are not careening out of control, so no worries about a Wall Street crash among the rural power set. TIER is super (2.27, which is happier than the 1.25 required to borrow cash). Modified debt is A-OK. Aggregate cash is weathering nicely. Cash equivalent is solid.

3.) We have growth. Consumer growth rate was 1 percent. OK, 1 percent doesn’t sound super. But, that’s nearly double that of municipals and IOUs, according to the EIA. Kilowatt hours were up, too (1.22 percent).

Perhaps this only goes to prove that power is a necessity, and if you’re in the business of selling power and not selling a smart grid or a marketing campaign or investments or stock portfolios, you can survive those downturns. I’d say it’s all about ‘back to basics,’ but co-ops are all about basics and always were. They’ve never strayed from that.

Reminds me of the old farmer down the street from my parents’ place in Kansas. The man never strayed, either. Every year, he grew wheat. He’d say, “Kansas was meant to grow wheat. Period.” His peers experimented with soy beans, with corn for ethanol, with cotton, even. Trying to stay ahead of the market and the prices. But, that old farmer, he lived and breathed wheat. He knew wheat. He stuck with wheat. And, while he may have had a lean year or two, he never busted. But some of his peers did.

He had wheat; the co-ops have power. The simplicity and experience with both may be the key: Do one thing. Do it well. It’s a UNIX concept. It’s Google’s corporate philosophy. And, for co-ops, it may have been a saving grace during an economic crisis.