As energy costs rise and reliability issues persist, more Americans are questioning if the investor-owned utility (IOU) model still serves their needs. Growing frustration has sparked a shift: communities across the country are exploring ways to gain more control and accountability in how their power is delivered. Many are turning to publicly owned utility models as a solution. These municipal (‘muni’) and cooperative (‘co-op’) utilities differ from IOUs mainly because of their ownership and profit structures. Unlike the investor-owned model, munis are owned by the local government, whereas co-ops are owned by their customers. Historically, publicly-owned utilities have mostly serviced America’s most rural communities (especially in the Midwest and South), while the remaining 72% of national consumers get their energy from an IOU. But that may be changing, as larger metropolitan areas begin to seriously reconsider their options—potentially setting off a ripple effect far beyond their city limits.
Cities across the country have increasingly explored — and in some cases succeeded in — breaking away from investor-owned utilities (IOUs) in favor of publicly owned alternatives. San Jose, California and Tucson, Arizona are among the latest large cities to consider such a move. While the underlying motivations driving consumers and local leaders away from their IOU can vary, rising rates and reliability are consistent themes. In Tucson, escalating costs have driven public interest, while in San Jose, persistent reliability concerns have led city leaders to explore the creation of a municipal utility as a contingency if their current IOU fails to address the city’s needs. Although the decision to transition away from an IOU ultimately rests with each local community, it’s important to consider how regulatory differences between public and private utility models may shape the future of our national transmission infrastructure.
State public utility commissions (PUCs) and the Federal Energy Regulatory Commission (FERC) regulate municipal utilities (munis) and cooperatives (co-ops) differently from IOUs. At the state level, oversight of munis and co-ops occurs to varying degrees, but generally, most PUCs do not regulate their rates. While FERC regulates the interstate wholesale markets for electricity and gas, there are limitations on its reach when it comes to munis and co-ops. Specifically, most co-ops and munis are exempt from FERC rate-making oversight under Federal Power Act Section 201(f) as long as they do not engage in wholesale markets or interstate commerce.
This regulatory structure creates key distinctions between IOUs and public power providers. IOUs generate profits for shareholders by earning a regulated rate of return on infrastructure investments approved by state regulators. Publicly owned utilities, on the other hand, do not operate for profit. Their infrastructure investments are approved locally and built at cost, with expenses passed directly to customers. While this means munis and co-ops may have more limited funding for large-scale infrastructure projects—often resulting in a more cautious approach to expansion—they are typically able to offer lower rates for electricity than IOUs.
The regulatory independence that munis and co-ops enjoy can sometimes fuel skepticism toward formal efforts to advance long-distance transmission development. Recently, the two largest advocacy groups for co-ops and munis, the National Rural Electric Cooperative Association and the American Public Power Association, raised concerns around the transmission components of permitting reform legislation. Particularly, they viewed provisions in the 2024 Energy Permitting Reform Act calling for mandatory interregional planning among transmission planning regions as unduly imposing FERC jurisdiction over entities that are typically exempt. They feared these changes might compel publicly owned utilities to take on projects or costs that conflict with their financial priorities or customer obligations.
At the heart of these debates is the complex question of who pays for long-distance transmission—and how those costs are distributed among stakeholders. As regional and interregional transmission planning efforts continue to evolve, co-ops and munis will remain focused on balancing two key priorities: ensuring grid reliability and keeping electricity affordable for the communities they serve.
As more large load centers consider whether public power is right for them, the rift between FERC, state PUCs, and publicly-owned utilities claiming independence will likely materialize in more parts of the country, potentially in areas that could serve as critical nodes or end-points for long distance transmission lines. The potential isolation of such areas from centralized transmission planning could be detrimental, particularly if munis and co-ops choose to reject efforts that they feel don’t align with their self-determined regulatory structures. However, if munis and co-ops recognize that regional and interregional transmission networks can provide significant benefits—ones they may not be able to achieve on their own—they could emerge as key stakeholders, helping to drive the development of these vital transmission lines.
As Grid Strategies points out, there are encouraging examples of munis and co-ops collaborating with investor-owned utilities on large-scale transmission planning—with promising outcomes. The success of these efforts seems to hinge on a key insight: economies of scale are crucial. By bringing together a broad range of participants from different regions and areas of expertise, the planning process can more effectively identify and address system-wide inefficiencies. Compared to a fragmented approach, this collaborative model tends to produce more timely and cost-effective results for everyone involved.
While the distinct regulatory frameworks and operational models of munis and co-ops must be acknowledged, they should not be seen as insurmountable obstacles to advancing transmission infrastructure. Attempts to bolster large scale transmission planning efforts, either in Congress or at FERC, must overcome the regulatory and ideological barriers preventing some publicly-owned utilities from embracing macro-scale transmission. Lasting, effective policy solutions will require mutual understanding and cooperation—built on respect for the unique roles and priorities of all utility types—in order to deliver the best outcomes for ratepayers across the country.