Energy co-ops are non-profit institutions run by the customers that the cooperative serves. They are formed to help reduce individual cost for products and/or services and share expenses among a group of customers. In the energy industry, a co-op usually refers to a rural electric cooperative, which is a utility owned and operated by a rural region or municipal district for that region's use. Practically speaking, a co-op can be any utility which is owned by a group of customers with similar needs, but co-ops meeting specific standards are able to operate with special dispensations in many regions. Most co-ops in the US, for example, are exempt from some or all state regulations.

Rural cooperatives first appeared in the US in the 1930s, and today there are co-ops serving everyone from industrial and commercial customers to municipal ratepayers' associations. Rural co-ops receive financial support from the Rural Electrification Administration, and in some areas rural co-ops are permitted to participate in competitive energy marketing.

Federal and regional governments often contribute resources to co-ops including management expertise, funding support and grants. Rural co-ops in particular are seen as worthy of this support due to the importance of agriculture and the difficulty and cost of serving far-flung customers who may be too difficult or troublesome to serve in a competitive marketplace.

Co-ops may serve functions ranging from aggregation to managing and marketing its members' production of energy to creating and operating its own generating facilities. Next to acquisition of actual energy, the provision of ancillary services to its customers is the most important function performed by a co-op, because these services (demand-side management, conservation programs, load management, etc.) allow the co-op to serve its customers at a lower cost to each customer.

See also: