Differences between Public and Private Utilities

publicprivateutilitiesPut in the simplest terms, private ownership of electric utilities is a business, and the purpose of any business is to make a profit for the owners or stockholders. Public ownership of electric utilities is a service, and the purpose of that service is to provide electricity, at the least cost, for the customers of that utility. Public utilities are non-profit organizations whose facilities are owned by, and operated for, their customers. They are governed by locally-elected Boards of Directors.

Private or investor-owned utilities (IOUs) are for-profit corporations, whose facilities are owned by shareholders, and whose private Boards operate solely to provide a profit for those shareholders. Shareholders have little or no direct stake in the quality of service provided.

Local control and the lack of a profit motive are the defining characteristics that separate public power from the private utility industry. Because members of the public can buy shares of private utilities, IOUs are sometimes referred to as being ‘publicly held” or as “public utilities,” but the term “public” is more appropriately applied to consumer-owned utilities. Consumer-owned utilities can be People’s Utility Districts, Municipal Utilities, or Electric Co-operatives.

Nationwide, public power rates are generally lower than IOU rates, sometimes by 20-25%. Couple that with local control, and it’s easy to see why public power is becoming increasingly popular.