An electric cooperative, commonly called a co-op, is a form of utility ownership where the utility is a non-profit organization owned by its customers, called members or consumer-members. Utility operations and ratemaking are overseen by a Board elected by the members and the co-op is run by professional management hired by the Board. Because co-ops are operated as not-for-profit organizations any excess funds collected are typically returned to the members.
Historically, co-ops evolved in the United States to provide electric service to rural areas. Because of this they are sometimes called rural electric cooperatives. As the electric grid evolved in the United States in the early 1900s, neither municipal utilities nor investor-owned utilities had much interest in building costly distribution systems into rural areas. Given concerns about quality of life and the sustainability of agriculture, in 1936 the federal government created the Rural Electrification Administration, which provided for the creation of rural electric co-ops.
Many co-ops are distribution-only utilities that purchase their power from federal generation agencies. In cases where there is not enough federal generation available, groups of co-ops often band together regionally to create generation and transmission cooperatives that own facilities on behalf of the distribution co-ops.
The electric cooperative model has been applied in more than 45 countries in Africa, Asia, Europe, and South America. It also has been applied to ownership of renewable generation facilities through renewable cooperatives, especially in Europe.