The source of electricity in your home may seem simple: Just flip a switch or insert a plug in the wall. There’s a much more complicated network of infrastructure delivering electrons to those outlets, however, and the web of companies and other entities that keep the grid going is arguably even more complex.
Ever since the Rural Electrification Act of 1936 poured US federal government funds into turning the lights on across America, much of the grid has been maintained by a mix of either member-owned electric cooperatives or utility companies that are either publicly or investor-owned.
This means we have an interconnected electrical grid, the different components of which are largely run by three different types of institutions. Here’s a breakdown of how co-ops differ from utility companies, what that difference has traditionally meant and how things are changing right now.
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What is a utility company?
A utility company is simply the organization that maintains and operates a region’s energy generation and transmission infrastructure, including the power plants, solar arrays, wind farms, transformers and transmission lines. In other words, it is typically the company that runs the power grid for a certain area.
Increasingly, due to deregulation (which allows more than one company to sell electricity in a utility’s area) and other changes in legal and regulatory structures, a sort of middleman is emerging called an energy supplier. These companies work as go-betweens to connect customers to energy sources of their choice and compete with each other to sell electricity to individual residents and businesses.
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Not all customers in all markets have the option to choose an energy supplier. In states where the electricity market has been deregulated, electric cooperatives often get to choose whether or not they deregulate. Still, utility companies (or co-ops) exist in all markets and keep the grid operating to serve either energy suppliers, individual energy customers, or both.
What is an electric cooperative?
Like other companies and just about any other asset, utilities can be privately, publicly or cooperatively owned and managed.
As Corey Ramsden, vice president for Go Solar Programs at Solar United Neighbors explained to me, electric cooperatives are “generally defined as an electric utility owned by its members; as opposed to an investor-owned utility owned by shareholders, which is more common in the US.”
Solar United Neighbors works with electric co-ops to help them add more solar to their energy mix and also helps individual homeowners work with their utilities to connect their own solar panels to the grid.
Advocacy groups like Solar United Neighbors often find common cause with electric co-ops because they’re owned by members who are also the organization’s energy customers rather than shareholders primarily interested in seeing a return on an investment.
