According to Statista, in 2021, the United States was home to five of the world’s ten most valuable electric utilities. These utilities are responsible for generating, transmitting, and distributing electricity to homes and businesses throughout the United States. As a result, they perform a vital function in the daily lives of millions of Americans. But what exactly are these electrical services, and how are they regulated? What do they do to ensure the safe and reliable operation of the electric grid?
Understanding Electric Utilities
There are two main types of utilities: investor-owned utilities (IOUs) and publicly-owned utilities (POUs). IOUs operate electricity plants and sell electricity on long-term contracts to large customers such as major industrial and commercial customers. Some involve natural gas. POUs, on the other hand, are owned by local governments or by regional power authorities. They operate public utility districts (PUDs) that generate their power for homes, businesses, schools, hospitals, etc. PUDs may own power plants or other infrastructure.
How Are Electric Utilities Regulated?
The Federal Energy Regulatory Commission (FERC) regulates the rates that utilities charge and the terms under which they do business, while states regulate the service they provide. Some utilities also have to meet environmental standards, but FERC can’t enforce these standards.
Electric utilities must follow several critical rules, including:
- They must serve everyone who wants their electrical services and cannot engage in unreasonable discrimination or price-fixing.
- They must file regular reports about their operations with FERC, which evaluates them to ensure they operate efficiently. If not, it will step in and correct any problems.
- They must maintain emergency systems for their facilities’ safe operation and report any problems.
- Electric utilities that fail to meet these rules can face fines or other punitive measures, including suspension of operating licenses.
Ensuring the electric grid’s safety is one of the most critical jobs of electric utilities. One way they accomplish this is by providing customers with tools to monitor their consumption and safety. In many regions, customers can schedule a service call if they are worried about their circuit or use their smartphone to monitor their utility’s inventories.
Electric utilities contribute significantly to the U.S. economy and are vital to millions of Americans’ daily lives. Understanding how these electrical services operate and are regulated will help people better recognize these companies’ essential role in America’s future.
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