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RECs are owned by their consumer/members and operate on a nonprofit basis. The primary purpose of an REC is to make electric energy available to its members at the lowest cost. RECs may be exempt from income taxation if they meet IRS requirements. Rural Electric Cooperatives generally serve areas that the investor-owned utilities declined to serve because they could not do so profitably.
                                                                                                                                                                                                        Under the electric cooperative form of business, the customers who pay the monthly electric bills own the company. Since the cooperative is not motivated by profit, there is no need for state rate review. Rates are set by democratically elected boards of directors who represent the interests of the cooperative's consumer/members.
Municipal utilities are publicly owned for the purpose of providing a dependable, economical power supply to a city's residents. Like the Rural Electric Cooperatives, municipal utilities are not subject to state rate regulation because additional public oversight is unnecessary.
Investor-owned utilities (IOUs) are shareholder-owned, for-profit business corporations. IOUs pay federal and state income taxes on their profits after taking all available tax credits and deductions. An Investor Owned Utility's rates must meet the approval of state regulations due to the monopoly control of electric service in its franchised territories. Shareholders are assured of a fair return on their investment and customers receive reliable, reasonably priced electricity.