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The Voice of Business,
Industry & the Professions Since 1942
North Carolina's largest
business group proudly serves as the state chamber of commerce
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January 2005
Cover Story
Power With Heart
A generation after turning on the lights in
rural N.C., electric co-ops now are sparking economic development
By Heidi Russell Rafferty |
Randolph EMC lineman James
A. "Tony" Cole holds a child at Victory Junction camp for special children
in Randleman. The co-op has provided generous support for the facility.
Learn more
Special skills
help co-ops survive the storms |
When the
Randolph Electric Membership Corp. won a bid to provide power to the
Victory Junction Gang Camp for chronically ill children in Randleman three
years ago, the architect had a special request. “Look at the property with
your heart, not with your wallet,” he told the electric co-op leaders.
The Randolph EMC did just that, upgrading its lines to the camp’s remote
location so that the kids, who are sensitive to change, would not
experience power outages.
North Carolina’s 27 electric cooperatives are no longer just filling the
role of electric power suppliers. The private, independent, not-for-profit
entities have become economic lynchpins of their local communities,
opening both their hearts and their wallets. Robert B. Schwentker, chief
operating officer and general counsel for the North Carolina Association
of Electric Cooperatives and a member of the NCCBI board, says,
“Commitment to community is the overriding mission in nearly everything we
do, whether it’s delivering reliable, affordable energy, awarding a
teacher a Bright Ideas grant, or attracting new business to rural North
Carolina.
“It’s a fundamental value of the cooperative business model which, above
all, stresses accountability to the individual co-op member. It’s a
guiding principal that has served us well for more than 50 years.”
Since 1995 alone, the cooperatives have helped bring more than 10,000 jobs
and $573 million in economic investment to the state. But it doesn’t stop
there. Electric cooperatives also are widely recognized for their
charitable support and contributions, winning national awards for their
efforts.
Their economic development successes are notable. QVC, America’s home
shopping network, based a large distribution center at a 150-acre site in
Kingsboro Industrial Park between Rocky Mount and Tarboro thanks to a
grant and other help from the Edgecombe-Martin County Electric Membership
Corp.
And the Roanoke Electric Cooperative in Rich Square transformed from a
lines-and-poles utility in the late 1990s into an award-winning community
resource that powers economic advancement in a distressed region.
But managers of the cooperatives are quick to point out that it’s more
than good business that drives their goodwill. They point to the
uniqueness of their organizations. Each, they note, was established for
the sole benefit of its customers, or “members.”
Eddie Stocks is manager of marketing and member services for
Edgecombe-Martin EMC. He has been with the utility 18 years and says that
“the biggest joy I get is the cooperative philosophy and way of doing
business.
“The reason we’re here is to serve the members in the communities. We
wouldn’t be here if not for them,” he says. “I enjoy that aspect. It is a
meaningful type of work. Working with our members and trying to assist the
economic development and growth of the communities, and improving the
standard of living and quality of life is rewarding.”
Chuck Terrill is executive vice president and CEO of the North Carolina
Electric Membership Corp., the umbrella organization for the co-ops. He
has loved his job working with co-ops for 30 years in North Carolina,
Kansas and Indiana.
“Co-ops are about people helping people,” he says. “This is a people
business, and it’s a business I love.”
 What
Sets Co-ops Apart?
An electric co-op
lineman participates in the Amber Alert program
Electric cooperatives differ from their large industrial counterparts,
such as Duke Energy and Progress Energy, in that they are owned by their
members, who elect a board of directors to set rates and policies.
Their business model guarantees that every customer has a voice. Each
cooperative is in the community it serves and is therefore in tune with
local needs, says T. Scott Poole, administrator of the Rural
Electrification Authority in Raleigh. More than 99 percent of the co-ops’
2.5 million customers are residential and small businesses.
“If you talk to members, they trust their co-op, because delivering
electricity was something the others weren’t willing to do in the early
days,” Poole says.
Indeed, many cooperatives got their start in the 1930s and 1940s when many
rural people across the state did not have central station electric
service. Those remote areas could not persuade investor-owned power
companies to offer power because of the cost. At the time, the federal
government made low interest money available through the Rural Electric
Administration, which had been launched in 1936 as part of FDR’s New Deal
program to “electrify rural America.” Edgecombe-Martin became the state’s
first established co-op in 1936.
“They basically control their own destiny,” says Poole, who worked with an
investor-owned utility for 18 years before joining the authority two years
ago. “There is no distinction between the success of the company and the
members. That’s what the business is all about – a sense of involvement
from everyone.”
The North Carolina Electric Membership Corp. (NCEMC) is the third-largest
electric cooperative utility in the United States, based on its 2003
annual revenues of $773 million, says Rick Martinez, manager of corporate
communications. Collectively, co-ops here have more than $3 billion in
assets.
On average, the co-ops supply about 2,000 megawatts of electricity per
day, Martinez says. Most of the power generated for the NCEMC comes from
long-term contracts with Progress Energy, South Carolina Electric & Gas
and Duke Energy, Martinez says. The NCEMC generates the rest – 648
megawatts – through its partial ownership of the Catawba Nuclear Plant,
operated by Duke Power in York County, S.C.
All but one of the 27 co-ops buy their power from the NCEMC. (French Broad
EMC buys its power from Progress Energy.) They distribute it over 90,000
miles of power lines they maintain to 93 of North Carolina’s 100 counties.
Collectively, the cooperatives employ more than 2,400 skilled people.
The co-ops are steadily growing. The annual amount of electricity they
deliver increased more than 35 percent during the past 10 years. During
the next 14 years, the annual growth rate is expected to be 2.3 percent.
One challenge for co-ops today is to encourage members to get involved and
to understand that they actually are owners, Terrill says. “Sixty-five
years ago, when co-ops were formed by farmers and rangers, they built
lines and brought service to these areas. They recognized the value,
because they were building it. There was pride of ownership,” he says.
“ The history of the co-op hasn’t transferred to the younger folks. We’re
trying to keep them engaged in the process of electing their directors,
and it’s an ongoing challenge.”
Meanwhile, economic development is of central importance among the co-ops’
missions, Terrill says. Each co-op tries to meet the unique needs of its
community. They have access to various loan programs that can be used for
various local groups, such as schools, firehouses, economic development
organizations or charities.
Co-ops can apply for federal Rural Economic Development Loans and Grants,
which are zero interest loans and grant programs available to business and
industry, Poole says. They fund projects that increase economic activity.
Poole’s agency approves each loan or grant. “It’s a way for the co-op to
give back,” he says.
Additionally, co-ops can apply for the Business Development Loan Fund, a
revolving fund offered through the NCEMC, says Bud Cohoon, manager of
economic development. Each cooperative can borrow up to $1 million at zero
interest. Pass-through loans are then given to a county or another
economic development entity.
“They can use that for what we call speculative loans, like a spec
building, or using the monies for the creation of an industrial park or as
a revolving loan,” Cohoon says. Each cooperative can set its own criteria
for how the money is used, when it will be paid back, or even if they want
to charge interest. Since 1996, the NCEMC has loaned more than $35 million
to co-ops.
“The fund has been successful and well-received. It gives the co-ops a
great asset to assist their local communities. The program is highly
utilized in the business recruitment process,” Cohoon says.
Follopwing are some examples of the various ways that co-ops around the
state have become integral players in their communities’ economic
advancements or have contributed to the local quality of life:
Roanoke Electric Cooperative
When Curtis Wynn joined Roanoke EMC in 1997 as the new CEO and executive
vice president, it was apparent to him that he had to help improve the
economic vitality of the region.
Each of the five counties that Roanoke EMC serves is a Tier 1 county, a
designation used by the state Department of Commerce to describe those
most economically distressed. Halifax, Hertford, Northampton, Gates and
Bertie counties have an average per capita income of only $14,985 and an
average median household income of $28,077.
Wynn’s background was in member services, economic development and
technology. He saw potential for progress and sold it to his board of
directors.
“A lot of companies get involved with being good corporate citizens,
because it’s good for business. We started out that way and found out
quickly that while that’s a good thing, there’s so much more a co-op could
do if it makes it a business proposition – something that is a
self-sustaining business opportunity,” Wynn says.
The co-op wanted to help with civic and social changes, such as workforce
development and enabling low-wealth citizens, but it was not equipped to
do so alone. In 1999, it convened local agencies, educational institutions
and local government officials to discuss the problems of the area. The
group named themselves the Roanoke Chowan Partners for Progress. It
applied for funds from the U.S. Department of Agriculture to carry out
objectives they had identified. But they did not get the money.
“Immediately after we got the news, we made a decision to continue with
our efforts. That’s where the co-op was instrumental,” Wynn says.
The co-op launched a non-profit subsidiary, Roanoke Economic Development
Inc., as a tax-exempt 501c3 organization. This made it eligible to solicit
support for economic development ventures from charitable foundations and
other grant-giving entities, Wynn says. Since then, it has worked with
such groups as the Golden Leaf Foundation, the N.C. Rural Economic
Development Center and the Z. Smith Reynolds Foundation.
In April 2004, the subsidiary and the Partners for Progress group
established The Roanoke Center. The center focuses on building wealth in
the region by promoting financial literacy, increasing jobs and income
opportunities, and promoting the use of technology in community and
business life. Thus, it builds capabilities to strengthen the area’s
economy and quality of life.
This year, the center received a Golden Leaf grant to set up a
construction consortium, Wynn says. The consortium assists those with
construction-related talents in training, obtaining bonding for projects
other than what they typically do and forming partnerships with larger
construction companies.
The center also offers the public free access to the Internet through its
public access lab. It has an agreement with Roanoke Chowan Community
College to do computer training for small groups. The center has also
received part of a grant that will establish it as a hub for video
conferencing among school systems in Northampton County.
The center has a full-time staff of six. Contributions from foundations or
grants support a $700,000 annual budget. But Wynn notes that eventually,
the center must become self-sustaining. So in 2000, the co-op established
another subsidiary – a for-profit company that will create business
ventures to sustain economic development efforts over the long haul.
In 2000, the National Rural Co-ops Association highlighted Roanoke’s work
with the Partners for Progress. Additionally, the Roanoke Valley Chamber
of Commerce named the co-op Small Business Advocate of 2003.
Randolph EMC
Remote, rugged land spanning 1,000 acres in the heart of the state became
the ideal place for the North Carolina Zoo in Asheboro in the early 1970s.
But without the electric infrastructure provided by Randolph EMC, visitors
would not experience the lush vegetation of sub-tropical regions, says
Dave Rowe, manager of co-op member and public relations.
The co-op provides infrastructure throughout the facility. “Everything has
to be hidden. Transformers can’t be seen. This is a natural habitat zoo,
and a lot of extra effort has been put into concealed spaces,” Rowe says.
He notes that during the zoo planning, the co-op met with architects to
discuss hiding wires in rock clusters or other natural areas.
The zoo is an important, large customer on the Randolph EMC system. A good
relationship only occurs with exceptional service, Rowe says. For example,
during an unusually cold winter two years ago, the co-op had planned
brown-outs for the region. The zoo’s curator explained that the zoo could
not be cut off because it had to preserve vegetation from Africa. “We did
keep the power on,” Rowe says.
To prevent future problems, the co-op designed a backup generator for the
zoo. The zoo now pays an “interruptible rate,” which is lower than
customary rates. During an energy shortage, the co-op cuts off the zoo’s
power to the system, and the generator takes over. The zoo pays off the
generator with the savings it realizes from the lower rates.
Randolph EMC also won a bid three years ago to provide power to Victory
Junction Gang Camp for chronically ill children in Randleman. “What set us
apart was that the architect told us, ‘When you look at the property,
don’t look at it with your wallet, but with your heart.’ We looked at it
with our heart,” Rowe says.
The camp has provisions to put in a generator much like the zoo’s. “The
load is sensitive. The kids are sensitive to changes. So the one thing
they don’t want is interruption in service,” Rowe says. Meanwhile, the
co-op upgraded all of its lines leading to the camp, which is in a remote
location.
Edgecombe-Martin County EMC
Convincing a large, nationally-visible corporation such as QVC to come to
the Tarboro area required incentives. Edgecombe-Martin County EMC helped
by offering a $500,000 interest-free loan to Edgecombe County to buy land
to accommodate QVC’s needs. QVC’s distribution center began production in
1999 in the Kingsboro Industrial Park off Highway 64. Today, it employs
about 650 people, says Eddie Stocks, manager of marketing and member
services. The 150-acre site hosts a 1.3 million-square-foot warehouse and
office center.
To make sure the industrial park had potential to develop more properties,
the co-op designed a transmission line and a substation to handle up to 35
megawatts of power. “We made that investment to get the facility to the
property,” Stocks says, adding that QVC is only using a small portion of
the power available. “It’s made the Kingsboro Industrial Park one of the
premier sites in the state,” he says.
Edgecombe also recently helped an Israeli company, Syfan, locate to Martin
County. Syfan makes shrink wrap that grocers use to wrap their produce and
meat. Its current manufacturing facility is in Israel, but 75 to 80
percent of its sales are in the United States, Stocks says.
The co-op provided an interest-free loan for $500,000 to Martin County,
plus $228,000 in loan funds that had been left over from a shell building
loan project several years ago. Syfan is in the process of getting
production lines in place and expects to be operating this month.
The co-op also supports local schools and community colleges. One program
in particular, first offered in conjunction with Edgecombe County, offers
a “readiness bag” for pre-kindergarten-age children. The co-op has
invested $8,000 in the program so far.
“Some kids have never owned a book or crayons or different things that
help them learn to read or master dexterity,” Stocks says. The program was
so popular that the co-op extended it to Martin County, too. Last year,
the National Rural Electric Association gave the co-op an award for its
efforts.
Albemarle EMC
Crabbing, fishing and agricultural jobs are prominent in the five counties
that comprise Albemarle EMC in northeastern North Carolina. So the co-op
has helped spur economic development by offering zero-percent interest
loans, says Jeffrey S. Edwards, executive vice president and general
manager.
The region lacks commercial and manufacturing jobs, Edwards notes. “When
children in our area grow up, they can’t come back, because there aren’t
enough jobs. The board here decided that if they could loan the money out,
higher paying jobs might result,” Edwards says.
During the past 8 years, the co-op has made $1.9 million available to
various government or private citizens in Currituck, Camden, Pasquotank,
Perquimans and Chowan counties, resulting in about 65 new jobs. Funds have
been used to build shell buildings, such as in the Pasquotank County
Commerce Park. That enabled them to attract Blackwater Target
Manufacturing, which makes steel targets and trains police agencies around
the world in military tactics. The company, which recently started moving
in, has created about 50 new jobs.
The co-op also gave a loan to developer Jon Crouse for the Tanglewood
Commerce Park. About a dozen jobs were created when the Eastern North
Carolina Natural Gas Co. moved into a shell building. Another building is
still vacant.
Like other co-ops, Albemarle also participates in the Operation RoundUp
program. Members can elect to round up their power bill to the nearest
even dollar amount. The difference between the rounded amount and the
actual electric bill goes entirely to the Albemarle Community Trust.
Individual contributions average about $6 per year. Participation is
optional.
The co-op gives funds to non-profits or individuals with specific needs.
In the past two years, the trust has put more than $100,000 back into the
local area through contributions to groups, such as volunteer fire
departments and a food bank.
Tri-County Electric Membership
Michael Davis found out through personal experience that the people who
make up the Tri-County Electric Membership are genuinely concerned with
their community’s needs.
Davis, the general manager at Tri-County, based in Dudley, had to stay at
the Ronald McDonald House of Greenville with his wife after his twin boys
were born prematurely. Because of the Ronald McDonald House, the couple
was able to walk across the street to the hospital during the child’s
stay.
“I told employees how nice it was, and they adopted it and then got the
entire membership behind it!” Davis says.
Each year, the co-op prints a wish list from the house in its annual
report, naming items such as kitchen/food, cleaning/laundry and personal
hygiene materials. Members choose from the list and bring the items to the
annual meeting.
Other charity initiatives include Bright Ideas Grants, which support
initiatives that may not be covered by traditional school financing. Since
1994, the co-op has awarded more than $255,000 to local schools and
teachers for special enhancement projects. Tri-County has also provided
$45,250 in scholarships to 102 students by publishing a cookbook.
The co-op has given loans to the Goshen Medical Center Inc., a nonprofit
group that helps the less fortunate, and to Duplin and Wayne counties to
help with shell buildings. The co-op made a loan for the expansion of the
Duplin County airport and another to help recruit a new tenant at the
Duplin Industrial Park.
Carolina Turkey in Mount Olive uses 15 percent of the utility’s total
load. The business employs about 2,500 workers.
Davis says Tri-County hasn’t had a rate increase since 1988 and prides
itself on holding down costs. The co-op has the least number of employees
per number of meters in the state.
“I’ve been here 29 years in December. I was fresh out of college. This has
been the best opportunity. I’ve been privileged to work with 49 of the
best people in the world. When one hurts, another one hurts, and when one
is happy, another is happy,” Davis says.
Special Skills Heal
Co-ops Survive the Storms
Years
of experience with serious storms has taught the state’s electric
cooperatives to implement a multi-layered, effective response to power
outages, says Jane Pritchard, director of corporate communications for the
North Carolina Electric Membership Corp.
“In 12 years, we have worked 13 full hurricanes and several
life-threatening storms – blizzards, tropical storms, Nor’easters. We are
geographically situated to get violent weather. Co-ops have experience in
rapidly responding during a storm. That, we’ve become good at,” Pritchard
says.
It’s customary for co-ops nationwide to assist each other during weather
disasters. But North Carolina’s co-ops have become so successful in their
storm response that other states turn here for a blueprint on what to do.
During the hurricanes that hammered Florida in 2004, co-ops collaborated
on everything from communications materials to crew assistance for power
restoration.
Because co-ops serve remote areas of the state, co-op crews must be ready
to wade through deep snow in a forest or fight snakes and mosquitoes in
the swamps, Pritchard says. “There are challenges, but we deal with it
well,” she says.
Sometimes, the problems are not far from home. During Hurricane Floyd in
1999, the Edgecombe-Martin County EMC’s offices were under five feet of
water, and the co-op had to relocate for two months, says Eddie Stocks,
manager of marketing and member services. Not only that – the co-op lost
one-third of its total membership. “It’s taken until last year to grow the
numbers back,” Stocks says.
Floods from the hurricane invaded homes and even sub-stations. Stocks
notes that it took 11 days for the water to rise and recede. “In those
situations, we had to be able to get our substations back online. It was a
big hurdle,” Stocks says. He adds that once the water finally receded, the
co-op frequently had to disconnect and reconnect residential power over
the 18 months following the hurricane, because people were continually
renovating or restoring their homes.
The experience taught Stocks and others the value of positive
relationships with their counterparts. About a dozen other co-ops helped
with everything from providing additional computers to linemen, crews and
servicemen to handle the extra work. The NCEMC also communicated to
customers on behalf of the co-op during the early days of the disaster.
Restoring power after a major outage involves more than throwing a switch
or removing a tree from a line, Pritchard says. Here are the steps coops
go through to bring the lights back on:
Step 1: Transmission substations receive power from transmission
towers and lines. The lines seldom fail, but they can be damaged. Because
thousands of people might be served by one high-voltage line, attention
goes here first.
Step 2: Local distribution substations serve thousands of
customers. A problem at one of these could be caused by failure in the
transmission system that supplies it. If the problem can be corrected at
the substation level, power may be restored.
Step 3: The co-ops next check main distribution supply lines if
they cannot isolate the problem at the substations. These lines carry
electricity from the substation to a group of consumers, such as a town or
housing development. If there is no problem farther down the line, all
customers served by this supply line could get their power back.
Step 4: The final supply lines, called tap lines, carry power to
the utility poles or underground transformers outside houses or other
buildings. Line crews fix the remaining outages based on restoring service
to the greatest number of customers.
Step 5: If you don’t have power but your neighbor does, you’ll need
a service crew. Sometimes damage occurs between your house and the
transformer on the nearby pole, causing an outage at just your residence.
— Heidi Russell Rafferty
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