Rural Electricity Jargon Explained

Your Missouri Electric Cooperatives are dedicated to bringing you, our Member-Owners, safe, reliable, and affordable electric power. One of our Seven Cooperative Principles is Education & Training, and we take that Principle to heart.

Today on the blog, we’ve got several helpful rural definitions to share with you. All of these definitions are related to rural electrification, and we hope that sharing them will help you to better-understand the value your Cooperatives bring to rural Missouri communities.

The Association of Missouri Electric Cooperatives is the statewide association of Missouri Electric Cooperatives, organized and controlled by member Cooperatives throughout the state. The Cooperatives formed the state association to realize greater economy by pooling services in one central organization.

Among the services offered to member Cooperatives AMEC are: assistance with member Cooperative annual meetings; safety and job training for Cooperative employees; legislative research; public relations services; and publication of the monthly Rural Missouri magazine.

Area Coverage
This concept holds that all applicants in an area served by a rural electric system would receive electric service, the investment required to extend the service notwithstanding.

Generation & Transmission (G&T) Cooperatives are organized by other rural Cooperatives to act as the wholesale supplier of electric energy. REA loans are made only when adequate power is not available from other sources, power costs would be less from G&T than from other sources, or the security of the Cooperative is jeopardized by unstable or unsatisfactory power sources.

In Missouri, G&T Cooperatives have pooled their power supplies and interconnected them with several power company systems. This pooling achieves maximum efficiency and dependability of service to consumers.

The National Rural Electric Cooperative Association is a nonpartisan, nonprofit service organization for the mutual benefit of its members.

The Pace Act
Passed in 1944, the Pace Act extended the repayment period for REA loans from 25 to 35 years. It establishes REA as a permanent agency and set the interest rate on REA loans at a flat 2 percent. In return, Congress made it clear that it expected to Cooperatives to provide “area coverage” — something not achieved under the shorter loan period and flexible interest rates applying to earlier years.

Rural Electric Cooperatives (RECs) are nonprofit suppliers organized for the purpose of bringing electric power to consumers within specified rural areas. RECs are tax paying, free enterprise organizations, and RECs are owned and controlled by the people they serve.

The REA of 1936 made available federal loans to Cooperatives and companies in order to bring electricity to rural America. These loans must be paid back within 35 years with interest. In exchange for the loans and the favorable interest rate, the Cooperatives and companies agree to provide area coverage with electric service.

The Rural Electrification Administration is the banker for the rural electrification program. Created in 1935, REA makes long-term loans to both cooperatives and companies for the purpose of bringing electric power to rural areas. The relationship between REA and the rural electric cooperatives is that of a banker to borrower. REA is a government agency under the Department of Agriculture.

*All definitions taken from the AMEC Member Journal 2015

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