Electric utilities and gas utilities supply electric power and/or natural gas, or connect lines to industrial, commercial, and residential customers. They perform a variety of power generation, transmission and distribution activities. For electric utilities, power generation is the process of converting non-electrical energy such as chemical combustion, nuclear fission, flowing water, wind, or solar energy into electricity. Power transmission is the delivery of electricity from power plants to electrical substations, and then to medium-voltage power lines and pole-mounted transformers. Power distribution is the delivery of this generated and transmitted electricity to the industrial, commercial and residential customers that electric and gas utilities serve.
Electric utilities and gas utilities are usually regulated by local and national authorities. They operate in geographic regions called territories, and divide consumers into sectors based upon the services received. With electric utilities, customers are categorized based on parameters such as demand levels, rate schedules, and distribution voltage. Demand levels reflect the peak hourly rate at which electricity is delivered to loads and scheduling points. Rate schedules or rate tariffs are used define the pricing agreements for electricity. Distribution voltage is factor to consider because electrical substations must transform power from the transmission voltage to the distribution voltage. Electric and gas utilities must also consider application, especially with regard to power-quality issues.
There are many different types of electric utilities and gas utilities. Within the electric utility industry, there are four major categories: investor owned utilities (IOU), Rural Electric Administration (REA) cooperatives, municipal electric systems (munis), and federal government entities. IOUs are the largest segment of the electric utility industry and acquire funding for new projects by selling publicly-traded stocks. REA cooperatives serve rural areas and are funded through low-interest loans from the Rural Electric program. Municipal electric systems or munis are electric and gas utilities funded through municipal revenue bonds and are regulated by the municipalities they serve. Federal government entities generate and distribute power from hydroelectric facilities.
Electric and gas utilities include publicly and privately-owned entities in the gas utility industry. These suppliers use pipelines and other distribution systems to provide natural, manufactured, mixed, and liquid petroleum gas to residential, commercial and industrial customers. Like other businesses in the energy sector, these electric and gas utilities also offer efficiency programs to consumers.