Travel anywhere in the U.S., and you’ll find a place to plug in your phone charger. No matter where you go, you’ll encounter the same wall socket used to access electricity. While the power charging your phone may be identical, the organizations delivering the electricity are not.
Electricity is delivered through three types of power providers: investor-owned utilities (IOUs), public power systems and electric cooperatives. Two-thirds of American homes and businesses receive their electricity through an IOU. Public power companies serve 15% and co-ops deliver power to 13% of the nation’s consumers.
The biggest difference between the three is profit motive. Public power systems and electric co-ops are not-for-profit organizations. That means their primary motive isn’t to make a profit, but to deliver electricity to the homes and businesses they serve at the most reasonable cost. In other words, their first objective is service.
Compare that to investor-owned utilities. As the name implies, IOUs are owned by investors. Those investors hold shares of stock in the utility. The goal of the IOU is to earn profits to raise the value of the stock and provide income to the shareholders in the form of dividends. No matter how much effort an IOU puts into being a good power provider for its customers, its ultimate goal is to make money for its owners.
Public power systems are owned by municipalities, which means they’re technically owned by the taxpayers they serve. The people who run these government units want to keep the taxpayers happy, so their goal is to keep rates low. Similarly, co-ops are owned by the members they serve, and their primary motivation is the same — to keep the cost of electricity as low as possible.
Decision-making is another differentiator. IOUs are large corporations. If one of their customers has a concern, they’ll likely have a difficult time getting the utility’s management to listen. For public power, the same officials elected or hired to manage things like streets and parks oversee operations. A customer can reach out to their government representative if they’re unhappy with the service they receive.
Once again, co-ops are different. Their operations are managed by a volunteer board of directors made up of members. Those directors represent their neighbors and have an obligation to consider other members’ concerns and preferences. A co-op member who has questions about their rates or concerns about their service can turn to their local director for answers.
Infrastructure needs represent another key difference. Public power providers and IOUs tend to serve areas like cities, suburbs and larger towns that have higher population densities. Most co-op service areas are in rural communities, where members are more widespread. As a result, co-ops average just 7.98 members for each mile of power line, compared to 32.4 customers per mile for the other types of power providers. That means co-ops must manage significantly more infrastructure for the number of homes and businesses they serve.
Because electric co-ops are inherently focused on the needs of their members, they center planning and operations around the region they serve. They also play active roles in building the economic strength within their service territory through community support and economic development initiatives.
