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U.S.

Rural Electrification: Adapting Business, Technology, and Government to Meet Local Needs
Presented by Commissioner Dennis O’Brien Minnesota Public Utilities Commission

Electric Utility Types Have Significant Differences
• Investor Owned (for profit) • Federal non-profit (4 Power Marketing Authorities plus the Tennessee Valley Authority) • State and local government non-profit (presently 2,010 in the US) • Rural Electric Cooperatives (customer owned)

Characteristics of Utility Types
Buyers Trans. Investor 73 % 77 % Cooperative 12 % 6% Public 15 % 6% Federal ---11 % Non-Utility ------Distrib. Gen. Buyers/Mile 48 % 47 % 35 42 % 5% 7 7% 9% 47 3% 7% ------32 % ----

Rural Electrification In The 1930’s Great Depression
• 90% of rural American’s did not have access to electricity • Privately owned companies providing utility services did not find rural investment profitable • Rural non-profit cooperatives lacked access to funds and often lacked essential engineering and managerial resources necessary to succeed

U.S. Rural Electrification Administration (REA) -- 1935
• Provided low-cost loans and loan guarantees for cooperatives’ generation and distribution equipment • Introduced modern construction methods, standardized equipment and introduced uniform procedures • Made studies and distributed information to local cooperatives

Adaptation
• 1949 -- REA adds Rural telephone service to mission.
• 1994 -- REA became Rural Utility Services (RUS) within USDA Rural Development Bureau, along with Rural Business Cooperative Service and the Rural Housing Service. • Each state now has a Rural Development Director and at least one office. • RUS programs include: electric; telecommunications and broadband; and water and waste.

Rural Development Bureau Programs
• Provide grants, direct loans, and loan guarantees • Six (6) of thirty (30) are energy specific -- In one, the intermediate utility administers loans to others for economic development -- Three support liquid biofuels -- Two support purchase of energy efficiency and renewable fuel systems

Assessing Competitive Advantage
• Availability: do resource maps indicate sufficient, reliable amounts to meet demand?
• Demand: is it constrained by present or planned transmission; by income? • Utility type: does the type of utility have incentive for this project? • Transmission regulation: who gets reliable access and how? Is there congestion?

Overcoming Barriers
• Investor-owned utilities may be induced to invest through tax incentives or by other means • Publically owned utilities may be induced to support electrification if the same investment furthers goals for: -- clean water -- waste management -- telecommunications and/or -- other economic development

Reaching Areas With Low Customer Density
U.S. Rural Electrification Administration remains a practical model to provide sustained service to rural areas by providing customerowned cooperatives with:

• funding • technical and business tools and • assessment information