he average Alaskan’s residential electricity rate is $0.24 per kWh, according to findenergy.com. That compares to the average price of $0.16 nationally. Only five states have higher average electricity rates. On a monthly basis, on average, the state’s residents see a household electricity bill totaling $140.69, slightly higher than the national average of $138.02.

Averages, though, smooth over an important distinction in how electricity reaches Alaskans. Well, a couple of distinctions; the fundamental difference is whether customers are plugged into a wider grid or if they are an isolated system. Behind the wires, though, utilities differ in a key way. Some are for-profit companies whereas others are not-for-profit cooperatives.

How do the two ownership models differ operationally? According to Michael Rovito, deputy director of the Alaska Power Association, the main distinction is the level of consumer participation. Member-owned cooperatives (co-ops) are governed by a board of directors elected directly by customers. A privately-owned electric utility often has a board made up of shareholders, or it operates under a sole ownership structure. Alaska Power Association, an Anchorage-based trade group, covers utilities of both types, although its principal members are cooperatives or municipal departments selling at least 800 MWh per year.

Philip Wight, an affiliate researcher with the Alaska Center for Energy and Power at UAF, notes that investor-owned utilities (IOUs) have been “very focused on making a profit; returning money to their investors.” Consequently, “generally speaking, I think that means that those investor-owned utilities have been more interested in load growth, in electrification.”

More than 90 percent of Alaskans receive electricity from co-op or municipal utilities, according to the Alaska Power Association, yet the for-profit segment plays an important role.

Wight says they have been better at innovation, in a sense. “Part of that’s based on their desire to make more profit. And they’re coming from a different background; more of a business background for-profit background, a little bit more nimble,” he says.

Conversely, Wight describes co-ops as “very focused on things like community. They’re really not driven by profit. They’re owned by those that they serve.”

As an example, Matanuska Electric Association (MEA) operates differently from privately owned utilities, explains Julie Estey, MEA’s chief strategy officer. “Our primary focus is on serving the needs and interests of our member-owners rather than generating profits for shareholders,” says Estey of the member-owned cooperative.

That focus leads to different rate-making principles. Estey notes, “We aren’t allowed to earn and retain a profit, and rates are based only on actual costs from quarter to quarter. Any overcollection which may be due to higher than anticipated usage or lower than anticipated spending (called margins) offsets future rates or is returned back to members through the allocation of capital credits.”

Capital credits are invested back into MEA infrastructure in the short term to ensure reliability and longevity of assets or, as financial health of the cooperative allows, returned to members. “This ensures rates are limited only to what is essential to run the cooperative and investments are made with long-term health and sustainability in mind versus just high turnover of investment dollars to shareholders,” Estey explains.

On matters such as rate hikes, infrastructure investment, or how to leverage a surplus budget, co-op members often can chime in.

An investor can buy shares of a for-profit utility (if any are for sale), whereas customers of a co-op automatically become voting members. There are more ways to become directly involved with how electricity is produced and distributed, and members have a say in how it’s purchased and sold in a local community.

Meera Kohler, the retired CEO of Alaska Village Electric Cooperative, notes there are more than IOUs, co-ops, or municipal utilities in Alaska. Some hybrid organizations are tribally owned but might be for-profit.

“Since cooperatives are member owned and the governing board is elected by the membership, I believe they’re more responsive to their rate payers,” Kohler says. “They’re also more favorably taxed; co-ops pay a modest gross receipts tax to the state, which is then sent back to the local community.” That rebate lowers the “rate base” that determines how rates are calculated.

In Kohler’s forty-two years of experience, mostly in cooperatives, “while municipal utilities try to be responsive, they’re hampered by many things—especially mayoral and assembly priorities, which don’t necessarily mesh with individual ratepayer needs.” On the other hand, co-ops “tend to be smaller and locally led and participate in many community events,” demonstrating a strong sense of civic responsibility.

Among the few for-profit IOUs in Alaska, the most prominent example defies the stereotype of a Wall Street shark. Alaska Power and Telephone provides electricity and communications services in more than forty communities, from Metlakatla and Wrangell to Tok and Bettles. The investors, though, are the people who work for the utility; it has an employee ownership structure. Earlier this year, the company relocated its headquarters from Port Townsend, Washington to Ketchikan, to be closer to its customers.

For all that, Rovito doesn’t see a big disparity in how each ownership model provides services. “While a member-owned cooperative is not-for-profit and a privately-owned utility is for profit, they both have the same goals: safe, reliable, and affordable power.”

In many areas of the country, privately-owned utilities tend to serve large cities while member-owned cooperatives tend to serve rural areas. “This isn’t necessarily the case in Alaska, with member-owned cooperatives providing power to a majority of the state while privately-owned utilities also provide power to rural areas and some larger communities,” Rovito notes.

The main difference between how member-owned cooperatives and privately-owned utilities interact with their customers, as Rovito sees it, comes down to the governance structure. “Electric cooperative members directly elect the board of directors, giving them the power to shape the direction of the co-op through their voting choices,” he says. “Electric consumers don’t have a say in the makeup of a privately-owned utility’s board of directors or governance structure.” Unless, of course, the consumer happens to be a shareholder as well.

That said, both types of utilities provide customer service functions and offer ways to get answers to questions, Rovito says.

A survey of business leaders by Harvard Business Review Analytic Services finds that, by a wide margin, organizations know how integral the customer service experience is. A whopping 93 percent of leaders surveyed indicate that addressing customer inquiries properly is highly or extremely important to the success of their organization.

Kohler shares, “I can mainly speak for myself, but I’ve experienced very direct engagement with my members, and they know they can reach out to us at all levels within the cooperative and get a quick and fair resolution to most matters. We can’t always be knights in shining armor, but we can usually resolve minor issues that certainly aren’t minor to the individual and get to a win/win solution.”

At MEA, member interactions are characterized by high levels of engagement and transparency, says Estey. “As member-owners, our co-op members are integral to our decision-making process. We actively seek their input through comments at the board meetings, surveys, and other direct communications,” she says, which fosters “a strong sense of community and mutual trust.”

MEA’s cooperative model, she emphasizes, “allows us to be more responsive to the unique needs of our members,” such as implementing programs and services that directly benefit them.

IOUs, while also customer focused, “might have different engagement strategies driven by business objectives,” Estey observes. “Their interactions might be more transactional, aimed at customer satisfaction and retention to maintain a competitive edge in the market.”

For his part, Wight believes that co-ops have been more responsive to the needs of their members, more often than not, since they’re also the owners. “The members are really the shareholders. And compared to investor-owned utilities, which, if you’re going to run a business, you need to be responsive to your customers,” he says.

Customers who are also owners have extra sway with co-op managers. Wight says, “Co-ops, I think, during these extraordinary social moments, have been more willing to suspend the need for margins to help their customers,” such as during the COVID-19 pandemic when many people couldn’t pay their electric bills. In response, member-owned Golden Valley Electric Association suspended disconnections, saying, “If you can’t pay your bill, we’re not going to turn you off,” he recalls.

Nevertheless, Wight emphasizes that IOUs have not, by any means, ignored their customers. He considers them more agile when it comes to new technology.

Wight cites the example of private companies helping customers install electric vehicle chargers. Customers pay for more juice from the utility, but the utility saves the customer money on fuel. Wight observes, “That’s a win/win, right?”