How Electricity Rates Are Set: Utilities, Co-ops and City Power
Last updated 2026-10-16
Who sets your electricity rate depends on who owns your utility. Of the 574 US utilities BillHike tracks (those with 20,000 or more homes, or an open rate case), here is who serves American homes, from EIA-861 2025 data:
| Type | Utilities | Homes served | Share of homes | Who sets rates |
|---|---|---|---|---|
| Investor-owned | 145 | 96,341,132 | 76% | State utility commission, through rate cases |
| Electric cooperative | 281 | 15,369,688 | 12% | Board elected by members (some states also review) |
| Municipal (city-owned) | 124 | 10,619,384 | 8% | City council or utility board |
| Public power district or state utility | 24 | 4,705,976 | 4% | Its own governing board |
Investor-owned utilities: the rate case
Investor-owned utilities are private companies with shareholders, which is why the state regulates their prices. A base-rate change follows a set path:
- Filing. The utility files an application with the commission: how much more revenue it wants, how the increase is split between residential, commercial and industrial customers, and a "test year" of costs it is based on.
- Revenue requirement. The core number is operating costs, plus depreciation and taxes, plus a return on the money invested in the system (the "rate base"). The allowed return on equity, often 9.4% to 10.95% in the cases we track, is the shareholders' profit rate.
- Review. Commission staff, a consumer advocate and other parties file testimony challenging the costs. Most states have a legal deadline, often 9 to 11 months, for a decision.
- Public comment. Customers can comment in writing and at public hearings. See how to fight a rate hike.
- Settlement or order. Many cases settle for less than the request; the commission still has to approve the deal. In our data, commissions granted about half of what utilities asked for. See what our rate cases show.
Some states let utilities file multi-year plans with increases in each year, or use formula rates that adjust annually without a full case.
What changes between rate cases
Base rates are only part of the bill. Fuel and purchased-power costs usually pass through a separate adjustment clause, updated monthly, quarterly or yearly without a full rate case. Riders recover specific costs such as storm repairs, energy-efficiency programs or new transmission. That is why a bill can rise even when no rate case is open.
Cooperatives
Electric cooperatives are owned by the members they serve, mostly in rural areas. Members elect a board of directors, and the board sets rates, usually after a cost study. In most states the utility commission does not set co-op rates, though some states review them or let co-ops opt in to regulation. To influence co-op rates, attend board meetings, read member notices and vote in board elections. Co-ops return margins to members as "capital credits" over time.
Municipal and public power utilities
City-owned utilities are run by the local government: the city council or an appointed utility board sets rates, usually at a public meeting with a chance to comment. Public power districts and state-owned utilities have their own elected or appointed boards. How much the state commission oversees them depends on state law.
Supply and delivery in retail-choice states
In states with retail choice, such as Pennsylvania, Illinois, Ohio, Maryland and Texas, the local utility delivers power over its wires while customers may buy the electricity itself from a separate supplier. The commission regulates the delivery rate; supply prices come from the supplier contract or the utility's default service. 0 of the utilities we track report a delivery-only rate for their latest year, and their pages say so.
Sources
Utility counts and customers: EIA-861 2025 (released 2026-10-07). Rate-case process and returns: the commission dockets linked on each rate case page, last checked 2026-10-16.