Based on Rates and other Factors the IREA rates a 'D'

An electrical Coop's primary purpose is to purchase wholesale power and deliver that power through a local distribution network to it's member owners. The economics of this simple business proposition is very much a function of scale. In other words the larger the Coop in terms of membership, the better the economy of scale and the lower the cost of electricity for it's members.

As the largest Coop in Colorado by more than a factor of two the IREA has a tremendous advantage in scale and yet it still lags behind six other much smaller Coop's in the pricing of it's electrical rates [source: IREA website]. It's as if the IREA brought a gun to a knife fight and lost six times. In some cases pretty badly.

One reason for this discrepancy could have been that these other Coops had a cheaper source of wholesale electricity, however both Yampa Valley and Holy Cross buy their electricity from the same source [Xcel] as the IREA and deliver electricity at rates 8 to 12% below the IREA.

Looking for reasons for the IREA's relatively high rates I researched the 2008 [latest available info from the IREA] Form 990's submitted to IRS for these better performing Coop's and compared them to the IREA. The comparison between the Y-W Electric Association with about 62 thousand members and the IREA with about 138 thousand members in 2008 is the most telling.

EFFICIENT USE of LABOR:
Here I compared the number of employees per 10,000 members to get an relative idea of how well management deployed labor to meet the primary objective of purchasing and delivering wholesale power to it's member/owners. Y-W wins on this metric by nearly a factor of two.

Y-W Electric: 8.99
IREA: 15.89


DIRECTOR and TOP EXECUTIVE COMPENSATION:
Here I was looking to see whether the IREA's compensation plan was reasonable.

Top Executive Total Compensation:

Y-W Electric: $139,432
IREA: $469,869

Average Director Compensation:

Y-W Electric: $3,800
IREA: $22,973


EFFICIENT USE of CAPITAL:
Coop's have two primary sources of capital, member capital accounts and debt. Coop capital accounts are basically interest free loans from members used to fund the operations of the Coop. Coop debt typically comes in the form of government guaranteed loans or loans from the CFC which is basically a Coop of Coop's financing source. This is an excellent measure of how good a job management and the board of directors does deploying capital. In this case, the IREA, at double the size, deploys over four times the capital of Y-M Electric to deliver inferior rates.

Capital Credits Retained per Member:

Y-W Electric $747
IREA $1,020

Long Term Debt per Member:

Y-W Electric: $494
IREA: $4,674

Total Capital Credits and Debt per Member:

Y-W Electric: $1,240
IREA: $5,694

One of the problems with electric Coops is the lack of any market discipline and readily available comparative metrics. Most of us only know what our Coop's decide to reveal in their newsletters. We're pretty much kept in the dark. However, based on the little digging I have done and the metrics I've assembled and shared in this post and other posts, the best possible grade I could give the management and board of the IREA is a "D".

Just to be fair....could you do analysis of the cost of living when comparing the districts?

Also, to be fair....could you do analysis of the land mass that cover?

Y-W Electric is located on the border with Kansas in eastern Colorado. It's a true rural cooperative as compared with our mostly suburban IREA. The member density [per unit of land area] advantage in this case would go with the IREA.

Don't know about anyone else, but I'm confused by your references to Yampa Valley, Y-M, and Y-W.

Who/what are you really talking about?

Y-W Electric and Yampa Valley Electric are smaller Colorado Coop's referenced on the IREA website as having lower electrical rates than the IREA. Y-M is a typo---thanks I'll fix that.

I do not have a dog in this fight, I'm just trying to follow the discussion.

It seems to me that the level of difficulty involved in installing/maintaining lines, and the area covered/time required to access a specific area, as well as the level of customer service provided need to be considered when evaluating rates.

I'm not saying this hasn't been considered, I don't know.

I'm sure that there are other factors that are not being addressed in this analysis, but I would like to re-iterate something that was addressed on another thread and is also on the IREA website: the general manager got a $60K bonus last year on top of his salary, plus a 5% guaranteed raise per year for two years as voted by the IRRA board. By comparison, the amount that was approved by the same board for distribution back to the membership was something over $8K.

$60K is over a year's pay for many of us, but it's merely a year's bonus to IREA's general manager? I'd say that IREA is raking in the bucks, and looking at my most recent bill I'd also say that overpricing is a reason worth looking at by all members.