Electric cooperatives are private, non-profit corporations owned by their consumer-members. They are similar in concept to other consumer-owned businesses; including farm produce marketing co-ops and newsgathering and reporting co-ops, like the Associated Press. All cooperatives were formed out of what is known as the “Rochdale Principles,” so-named because of a system designed by a group of 28 weavers in Rochdale, England, to market their products.

Essentially, each consumer of the cooperative is a member, with on vote in the affairs of the cooperative. Bylaws, adopted by the members, set forth their rights and responsibilities and lay out the guidelines that assure a democratic organization. Members elect directors to serve on a Board of Trustees, and an annual meeting is held to conduct the business of the cooperative. Local boards employ a professional manager for the co-op, and the manager then has the duty of hiring trained personnel to perform the work necessary for the co-op to function.

The local cooperative Board establishes rates, based upon what it actually costs to provide dependable electric service, and to meet payment schedules on loans. Rates are designed so that revenues exceed expenses. This “margin” is allocated back to members of the cooperative in the form of capital credits. Members receive money back based on the amount of electricity they have used during the allocation period. This return of capital maintains the non-profit status of the cooperative.

Open Membership : Those who may reasonably use the co-op's services - within the practical limits imposed by existing facilities, geography, etc., - must be permitted to join. None may be barred for such reasons as race, religion, sex, nationality or economic situation.

Democratic Control : Effective means to control the organization must rest in the needs of the members on the basis of one member, one vote. In order to provide capital, members are urged to invest. No amount of investment, however, can earn more than one vote for any member.

Limited Return on Investment : Dividends paid on invested dollars should provide a fair "rental" for the members' money, but a nominal ceiling on interest prevents speculation in co-op stock. Fundamentally, the cooperative exists to provide services to its members, not to return dollars of profit to investors.

Return of Margins to Members : Dollars left over after all expenses would be read as profit for other organizations. In this case, however, they do not belong to the cooperative, but to the members, and must be so allocated on the co-op books. Such dollars are returned to members, on a basis decided by the member-elected board, in proportion to each member's use of the service.

Any organization failing to measure up to any one of these four "principle" tests cannot be considered a cooperative. Beyond these, the International Cooperative Alliance believes two more practices to be so essential to cooperative success that it has proclaimed them to be principles also. They are continuing education and cooperation among cooperatives.