Molly Ayala
The United States has a complex mix of publicly and privately owned electric companies. Publicly owned utilities, or POUs, include federal, state, and municipal-run utilities, while investor-owned utilities, or IOUs, are large, for-profit electric distributors owned by shareholders. In 2017, almost 3,000 electric distribution companies were operating in the US, with IOUs serving 72% of electricity customers. POUs, on the other hand, tend to be smaller and include cooperatives and community-owned utilities, serving around 1 in 7 customers.
Characteristics of electric companies in the US
| Characteristics | Values |
|---|---|
| Number of electric distribution companies | Almost 3,000 |
| Types of ownership | Investor-owned, publicly run or managed, and cooperatives |
| Percentage of customers served by investor-owned utilities | 72% |
| Examples of investor-owned utilities | Pacific Gas and Electric, Southern California Edison Company |
| Examples of publicly-owned utilities | Puerto Rico Electric Power Authority (PREPA), Los Angeles Department of Water and Power |
| Cooperatives | Not-for-profit, member-owned utilities located in 47 states |
| Public power utilities | Owned by the community, not-for-profit, provide low-cost electricity, protect the environment |
| Percentage of electricity generated by public power | 10% |
| Percentage of power distributed by public power | 15% |
| Sources of electricity for public power | Natural gas, coal, nuclear, solar, water, wind |
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What You'll Learn
- Investor-owned utilities served 72% of US electricity customers in 2017
- Publicly-owned utilities include federal, state, and municipal-run entities
- Cooperatives are not-for-profit, member-owned utilities
- Public utilities are subject to public control and regulation
- Public power utilities are community-owned and not-for-profit
Investor-owned utilities served 72% of US electricity customers in 2017
In 2017, investor-owned utilities (IOUs) served 72% of US electricity customers, according to the US Energy Information Administration's (EIA) electric power sector survey data. IOUs are large electric distributors that issue stock owned by shareholders. They are most common in heavily populated areas on the East and West coasts. In 2017, 168 IOUs served an average of 654,600 electric customers each. The two largest IOUs are in California: Pacific Gas and Electric, with 5.48 million customers, and Southern California Edison Company, with 5.07 million customers. Southern California Edison remained one of the utilities with the highest number of customers in the US as of 2023.
Publicly owned utilities (POUs), on the other hand, include federal, state, and municipal-run utilities. In addition to government entities, political subdivisions may run POUs, also called public utility districts—utilities that residents vote into existence operate independently of city or country government. The United States had 1,958 POUs in 2017, with an average of 12,100 electricity customers each. The largest POUs are the state-run Puerto Rico Electric Power Authority (PREPA), with 1.47 million customers, and the Los Angeles Department of Water and Power, a municipal utility with 1.43 million customers.
Cooperatives, or co-ops, are not-for-profit member-owned utilities. They are located in 47 states but are most prevalent in the Midwest and Southeast. The US has 812 co-ops, with an average of 24,500 electricity customers each. The largest co-op is Pedernales Electric Co-op, in Johnson City, Texas, with 333,809 customers.
Before the late 1800s and early 1900s, most utilities were run by municipalities. However, technological improvements in generation and transmission made smaller plants uneconomical, and many cities sold their equipment and transferred their customers to IOUs. The Rural Electrification Act of 1936 was a federal loan program that provided electricity to rural populations.
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Publicly-owned utilities include federal, state, and municipal-run entities
Publicly-owned utilities, or POUs, include federal-, state-, and municipal-run entities. They are non-profit and are owned by the community, operating as a division of local government. These utilities are governed by a local city council or an elected or appointed board. Citizens have a direct say in utility decisions, including the rates charged and the sources of electricity.
Public power utilities are one of the three primary types of electric utilities in the US, alongside investor-owned utilities and cooperatives. In 2017, there were almost 3,000 electric distribution companies, or utilities, operating in the US. Of these, 72% were investor-owned, serving three out of every four utility customers nationwide.
Public power utilities generate 10% of all electricity in the US and distribute, or sell, 15% of all power flowing to homes and businesses. They provide electricity to more than 55 million Americans in 2,000 communities across the country, including large cities like Austin, Nashville, Los Angeles, and Seattle, as well as small towns and the Navajo Nation.
Public power utilities are also more reliable, with customers experiencing 90 fewer minutes without power per year compared to customers of private utilities. They are also more environmentally friendly, buying or generating electricity from renewable sources such as solar, water, and wind. In several regions, they can buy wholesale hydropower generated from federal dams at cost and pass the savings on to customers.
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Cooperatives are not-for-profit, member-owned utilities
Electric companies can be classified into three ownership types: investor-owned utilities, publicly run or managed utilities, and cooperatives. Cooperatives, or co-ops, are not-for-profit, member-owned utilities. They are located in 47 states but are most prevalent in the Midwest and Southeast.
Co-ops are organizations of individuals called members who share ownership of the business and are also its customers. Joining a co-op is voluntary, and the members run the company democratically. Each member has the same status and works together to ensure the delivery of critical utilities to each other. This ownership structure significantly differs from publicly held companies, which are typically owned by shareholders who collect dividends.
Co-ops are led by members from the community and are uniquely suited to meet local needs. They are responsible for delivering essential services to primarily rural areas, helping improve the quality of life in the places they serve. Co-ops create local jobs and deliver other cultural and social benefits, providing a framework for community members to access crucial services like telehealth and online education.
Unlike investor-owned utilities, co-ops are not driven by profit. Instead, they reinvest their profits into their infrastructure to promote continued service and benefit local communities through cooperative enterprises. Many cooperatives partner with local organizations to support small businesses and create new jobs. Electric cooperatives, in particular, empower residents to come together and create a more sustainable way to power their community.
Co-ops have proven to be very cost-effective, and some have even managed to tap into urban markets due to growth into previously rural territories served by the co-ops.
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Public utilities are subject to public control and regulation
Public utility companies, or simply utilities, are organisations that maintain the infrastructure for essential public services, often also providing the service itself. Public utilities are subject to public control and regulation, which can take many forms, from local community-based groups to statewide government monopolies.
Public utilities are meant to supply essential goods and services, such as water, gas, electricity, telephone, waste disposal, and other communication systems. The transmission lines used in the transportation of electricity, or natural gas pipelines, have natural monopoly characteristics. A monopoly can occur when a company minimises its costs through economies of scale to the point where other companies cannot compete. For instance, if many companies are already offering electricity, the additional installation of a power plant will only disadvantage the consumer as prices could be higher.
Historically, public utilities were regarded as natural monopolies because the infrastructure required to produce and deliver a product such as electricity or water is very expensive to build and maintain. Once assets such as power plants or transmission lines are in place, the cost of adding another customer is small, and duplication of facilities would be wasteful. As a result, utilities were either government monopolies or, if investor-owned, regulated by a public utilities commission.
In the United States, utility companies are regulated at the state and municipal levels by public service commissions. The Federal Energy Regulatory Commission (FERC) is the US government agency that regulates the interstate transmission of electricity, natural gas, and oil. The majority of American consumers receive their utility services from private companies that are regulated at the state level by public service commissions. Government agencies can regulate the prices utility companies charge their customers, their budgetary process, their ability to construct new facilities, the services they are allowed to offer, and their energy efficiency programs.
In Kazakhstan, most public utilities are state-owned, and their activities are directly regulated by akimats, which can set tariffs for housing and communal services, ensuring the quality of services, and implementing social programs.
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Public power utilities are community-owned and not-for-profit
Electric companies in the United States are owned by a mix of private investors, cooperatives, and federal, state, and municipal governments. According to the US Energy Information Administration (EIA), there were almost 3,000 electric distribution companies operating in the country in 2017. The EIA classifies utilities into three ownership types: investor-owned utilities, publicly run or managed utilities, and cooperatives.
Public power utilities generate 10% of all electricity in the US and distribute or sell 15% of all power flowing to homes and businesses. They are environmentally conscious, buying or generating electricity from diverse sources, including natural gas, coal, and nuclear, as well as renewable energy sources such as solar, water, and wind. In some regions, public power utilities can purchase wholesale hydropower generated from federal dams at cost and pass the savings on to customers. In 2023, about 41% of the power generated by public power came from non-carbon-emitting sources.
Public power utilities are structurally geared towards the needs of the community. They provide reliable, low-cost electricity to their customers, who experience fewer minutes without power compared to customers of private utilities. Additionally, public power utilities allow communities to invest in their electricity infrastructure through municipal bonds. This enables community members to fund new generation equipment, transmission lines, and distribution system upgrades, while also receiving interest as public power utilities pay back the loans.
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Frequently asked questions
A public utility company, or utility, is an organization that maintains the infrastructure for a public service and provides a service using that infrastructure. Public utilities are subject to public control and regulation and are meant to supply essential goods and services such as water, gas, electricity, and telephone services.
The U.S. Energy Information Administration (EIA) classifies utilities into three ownership types: investor-owned utilities (IOUs), publicly run or managed utilities (POUs), and cooperatives (co-ops). IOUs are large electric distributors owned by shareholders and tend to be very large. POUs are non-profit and include federal, state, and municipal-run utilities. Co-ops are not-for-profit member-owned utilities.
Publicly-owned utilities include federal-, state-, and municipal-run utilities. Examples of federal-run utilities include the Western Area Power Administration and the Rural Electrification Act of 1936, a federal loan program providing electricity to rural populations.
