Supply Electricity Through Rural Cooperatives



Electricity cooperatives can help to increase electrification of rural communities because they are able to effectively channel local funds into an extension of the grid. Cooperatives are owned and run by the communities they serve and give these communities a voice in the cooperative's affairs and on the nature of electrification programmes. Costa Rica has four rural energy cooperatives which have been in operation for more than 30 years, and have proven to be effective and financially viable organisations. They supply about 20% of the electricity to rural areas that previously did not have access to an affordable and reliable supply.
The idea: 

Cooperatives can provide a mechanism through which local contributions can be channelled effectively into rural electrification projects. Such programmes do not have to survive on subsidies, but can be run on a cost-recovery basis, as shown in Costa Rica.

The Costa Rican rural cooperative programme was funded by a US$3.3 million loan from USAID, together with an US$800,000 contribution from the National Bank of Costa Rica. Design and construction of the programme was carried out between 1965-1969, and was implemented and coordinated by the national power utility - Instituto Costariccense de Electricidad (ICE). Technical and administrative training was provided to initial core-staff by the National Rural Electric Cooperative Association (NRECA) of the USA. Each of the three cooperatives initially formed was expected to contribute US$118,000 for the start-up funds to cover initial administrative and distribution costs.

The cooperatives then assumed responsibility for the administration, maintenance and expansion of the distribution systems under their control. Ultimate authority within the cooperative rests with the General Assembly (GA). Delegates from communities in the service area are elected to the GA every two years, and the GA elects an administrative council to oversee the cooperative's management - providing a measure of defence against gross mismanagement.

A focus on cost-recovery has been central to the success of Costa Rica's cooperatives. The cooperatives are obliged to cover their operating costs, as well as debt repayments and interest. Cost-recovery is operative from the time extension of the service is considered, and extension only takes place if it is financially viable. If the required investment is greater than the expected cash return, the project will proceed only if members of that community (except for low income families) are willing to pay the difference. Cost recovery means the cooperatives can effectively carry out maintenance work, extend their networks, improve their services and use some funds to fulfil agreed upon social objectives - all cooperatives, for example, run education programmes.

All four Costa Rican rural electricity cooperatives serve separate regional populations that were not previously served by ICE, and which were previously supplied by expensive and unreliable privately run mini-grids (usually diesel generators) that reached only a few household. Each cooperative charges varying connection fees and tariffs depending on what is required for cost-recovery in that area. As a consequence, all four have succeeded in operating effectively and efficiently, and have expanded their service areas, electrification rates and consumer numbers while running a surplus. The total number of consumers served by the cooperatives reached 83,534 in 1995 - about 20% of all rural consumers.


Where and When: Costa Rica, 1963 - present.
Initiated By: USAID, the National Rural Electric Cooperative Association, Instituto Costariccense de Electricidad.