Otis Singleton
The United States has a mix of publicly and privately-owned electric companies. Investor-owned utilities (IOUs) are privately owned and are large electric distributors that issue stock owned by shareholders. In 2017, almost 75% of electricity customers in the US were served by IOUs, with the two largest being in California. However, public power utilities, which are community-owned and not-for-profit, also play a significant role in the US electric sector, providing electricity to more than 55 million Americans across 2000 communities.
| Characteristics | Values |
|---|---|
| Investor-owned utilities (IOUs) customers served in 2017 | 72% |
| Number of electric distribution companies operating in the US in 2017 | 3,000 |
| Number of IOUs in 2017 | 168 |
| IOU customers served in 2017 | 654,600 |
| Largest IOUs | Pacific Gas and Electric, Southern California Edison Company |
| Publicly owned utilities (POUs) include | Federal-, state-, and municipal-run utilities |
| Number of POUs | 1,958 |
| Largest POUs | Puerto Rico Electric Power Authority (PREPA), Los Angeles Department of Water and Power |
| Cooperatives or co-ops include | Not-for-profit member-owned utilities |
| States with co-ops | 47 |
| Public power utilities customers | 55 million+ |
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What You'll Learn
- Investor-owned utilities (IOUs) served 72% of US electricity customers in 2017
- Publicly-owned utilities (POUs) are federal, state or municipal-run
- Cooperatives (co-ops) are not-for-profit, member-owned utilities
- Public power utilities are community-owned and not-for-profit
- IOUs are most prevalent in heavily populated areas
Investor-owned utilities (IOUs) served 72% of US electricity customers in 2017
In 2017, the US Energy Information Administration's (EIA) electric power sector survey data revealed that investor-owned utilities (IOUs) served 72% of US electricity customers. This equates to almost three-quarters of utility customers nationwide, or around 3 out of every 4 customers. In that year, 168 IOUs served an average of 654,600 electric customers each.
The EIA classifies utilities into three ownership types: investor-owned utilities, publicly run or managed utilities, and cooperatives. IOUs are large electric distributors that issue stock owned by shareholders. Despite there being fewer IOUs than the other two types of utilities, they tend to be very large. IOUs are most prevalent in heavily populated areas on the East and West coasts of the US.
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.
Publicly owned utilities (POUs) include federal, state, and municipal-run utilities. In addition, political subdivisions may run POUs, also known as public utility districts. These are utilities that residents vote into existence, and they operate independently of city or country government. The US has 1,958 POUs, 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, Southeast, and rural areas. The US has 812 co-ops, with an average of 24,500 electricity customers each. The largest cooperative is Pedernales Electric Co-op in Johnson City, Texas, with 333,809 customers.
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Publicly-owned utilities (POUs) are federal, state or municipal-run
In the US, publicly-owned utilities (POUs) are federal, state, or municipal-run. POUs are non-profit and include cooperative and municipal utilities. Municipal utilities may include territories outside of city limits and may not serve the entire city. Cooperative utilities, on the other hand, are owned by the customers they serve and are usually found in rural areas.
The history of publicly-owned utilities in the US dates back to the late 1800s and early 1900s when municipalities ran most utilities. By 1923, there were over 3,000 such utilities in existence. However, technological advancements in generation and transmission later made smaller plants uneconomical, leading many cities to sell their equipment and transfer their customers to investor-owned utilities (IOUs).
The Rural Electrification Act of 1936 was a pivotal moment for POUs, as it was a federal loan program that provided electricity to rural populations. This act spurred the formation of farmer cooperatives to bring electricity to communities not covered by IOUs or municipal utilities. These cooperatives, or co-ops, are still most prevalent in rural areas today and can be found in 47 states, with the largest being Pedernales Electric Co-op in Texas.
Publicly-owned utilities are regulated by governmental agencies such as the California Public Utilities Commission (CPUC) and the Public Utility Commission of Texas, which oversee the commercial activities of electric companies in their respective states. As of 2017, there were 1,958 POUs in the US, serving an average of 12,100 electricity customers each. The largest POUs are the state-run Puerto Rico Electric Power Authority (PREPA) and the Los Angeles Department of Water and Power, a municipal utility.
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Cooperatives (co-ops) are not-for-profit, member-owned utilities
The United States' electric companies are classified into three ownership types: investor-owned utilities, publicly run or managed utilities, and cooperatives (co-ops).
Utility cooperatives manage public services such as electricity, water, and telecommunications. Each member has a say in the governance of the co-op and the delivery of its services. As shareholders, customers benefit from the co-op's profits, which are either reinvested in the organization or distributed to members as dividends. Co-ops reinvest their profits into their infrastructure to promote continued service and reduce emissions. They are also committed to keeping rates affordable, especially for their consumers at the end of the line.
Co-ops are responsible for delivering crucial services to primarily rural areas, improving the quality of life in the places they serve. They create local jobs and deliver other cultural and social benefits. For example, they provide the framework for community members to access essential services like telehealth and online education.
Co-ops return more than $1 billion to their consumer-members annually as not-for-profit organizations. They are built by and serve co-op members in the community by delivering electricity and other services.
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Public power utilities are community-owned and not-for-profit
In the United States, there are three types of utility ownership: investor-owned utilities (IOUs), publicly run or managed utilities, and cooperatives. Investor-owned utilities are large electric distributors that issue stock owned by shareholders. IOUs served 72% of US electricity customers in 2017.
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 serve more than 55 million Americans in 2000 communities across the country, including large cities like Austin, Nashville, Los Angeles, and Seattle, as well as small towns and the Navajo Nation. They operate in 49 states and several territories.
Public power utilities are environmentally conscious, buying or generating electricity from diverse sources, including renewable energy sources such as solar, water, and wind. In several regions, they 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.
Communities can choose to create electric utilities to provide light and power to their citizens through community ownership and local control of their power supply. Funding through municipal bonds allows community members to invest in their electricity infrastructure and receive interest as public power utilities pay back the loan.
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IOUs are most prevalent in heavily populated areas
The United States' electric power sector is composed of investor-owned utilities (IOUs), publicly run or managed utilities, and cooperatives. IOUs are large electric distributors that issue stock owned by shareholders. Although there are fewer IOUs than the other two types of utilities, they tend to be very large and serve three out of every four utility customers nationwide. In 2017, 72% of U.S. electricity customers were served by IOUs, with 168 IOUs serving an average of 654,600 electric customers each.
The history of electric distribution in the United States began with Pearl Street Station, built by the Edison Illuminating Company and led by Thomas Edison. It began operating in Lower Manhattan, New York, in 1882, marking the beginning of modern electricity distribution in the nation. This method of electricity distribution soon spread to other city centers and densely populated areas. In smaller cities and towns, local governments established their own electric distribution utilities.
Over time, technological improvements in generation and transmission made smaller plants uneconomical, leading many cities to sell their equipment and transfer their customers to IOUs. This trend contributed to the concentration of IOUs in heavily populated areas. Today, IOUs continue to play a significant role in providing electricity to customers in densely populated regions of the United States.
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Frequently asked questions
Yes, some electric companies in the US are privately owned. These are known as investor-owned utilities (IOUs) and they served 72% of US electricity customers in 2017.
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.
The alternatives to privately-owned electric companies are publicly-owned utilities (POUs) and cooperatives (co-ops). POUs are owned by the community and run as a division of local government. Co-ops are not-for-profit, member-owned utilities.
There were 1,958 POUs in the US in 2017, with an average of 12,100 electricity customers each. Collectively, they serve 1 in 7 electricity customers across the US.
No, homes and businesses powered by public power utilities pay less for electricity than those powered by private utilities.
