Explore Types of Utility, Energy, and Waste Companies
Learning Objectives
After completing this unit, you’ll be able to:
- Identify the different types of utilities.
- Describe the types of utility, energy, and waste companies.
Utilities Basics
Take a look at the three types of utility products and how utility companies work to produce the products and transport them to customers.
Electricity
Electricity starts with generation. Traditional power generators are utilities that produce electricity from fossil, nuclear, and renewable energy sources.
This image shows the electricity production and distribution process.
After power is generated, it’s often transformed from low to high voltage, so that transmission lines can efficiently carry it over long distances. When power nears its final destination, distribution transformers convert high-voltage power back to low voltage and deliver it to customers at end usage points. Some large commercial and industrial customers draw power directly from transmission lines.
In some markets, customers create their own power using distributed energy resources (DER) systems. DERs are small-scale power generation or storage systems located close to where the electricity is used, such as in a home or business.
Energy retailers, also called vertically integrated utilities depending on the market, sell electricity to customers. Some customers generate and store their electricity on-site with photovoltaic (PV) solar panels, electric vehicles (EV), and microgrids. They can also sell their energy back to utilities.
Gas
Natural gas is a nonrenewable hydrocarbon gas used as a source of energy for heating, cooking, and electricity generation. The natural gas production journey involves several complex stages. First, companies extract fossil fuels and biofuels. Next, they process the fuels using odorification, compression, metering, and finally liquefaction. Lastly, companies sell the processed gas to the commodity market.
This image shows the production and distribution process of natural gas.
Transmission networks move high-pressure gas to large industrial customers, gas-powered electricity generators, or storage. Storage facilities hold the gas reserves.
Distribution companies receive gas from transmission companies and deliver it to their customers. Depending on the market, distribution companies sometimes operate as a regulated monopoly or a competitive retail company. In a competitive gas market, retailers and gas suppliers sometimes purchase gas from the distributors and pay them to ship it to the customer's premises.
Water
In this image, observe how water is sourced and distributed to customers. The image also shows how utilities collect wastewater from customers and send it for treatment.
Utilities source water from rivers and reservoirs, water-treatment plants, and service reservoirs by abstraction and treatment. They store the treated water in storage facilities before transporting it to customers.
Similar to gas, in a deregulated water market, a retailer or utility company purchases water from the distributor and pays them to ship it through a clean water network for household or commercial consumption. The retailer has contracts with the customer and is responsible for billing water consumption and waste discharge. Wastewater is sent back into the system through a wastewater network for treatment and storage at sewage or sludge-treatment facilities.
Types of Utility, Energy, and Waste Companies
Now that you know more about how utilities function, examine the players that serve the utility service needs of customers. This section focuses on the electricity industry, but the gas and water industries have similar counterparts.
Power Generation, Transmission, and Distribution Companies
Power generation, transmission, and distribution companies specialize in creating, transmitting, and distributing energy and utilities.
Power generation companies generate electric power from primary sources of energy, such as solar, wind, nuclear, coal, oil, and natural gas. For utilities in the electric power industry, power generation is the stage before storage or delivery to customers through transmission, distribution, and so forth.
Transmission companies specialize in the bulk movement of electrical energy from a generating site to an electrical substation. At this point, distribution companies take over using interconnected lines known as a transmission network. The combined transmission and distribution network is commonly known as the Grid in North America and the National Grid in the United Kingdom, India, Tanzania, Myanmar, Malaysia, and New Zealand. Transmission companies are often combined with or serve as distribution companies.
Distribution companies deliver electric power by carrying electricity from the transmission system to individual customers. Distribution substations connect to the high-voltage transmission system and use transformers to lower the transmission voltage to medium voltage ranging between 2 kV and 35 kV.
Electric Suppliers and Retailers
Electric suppliers and retailers are companies that buy electricity from the commodity market and sell it to customers. In many countries, the electricity market has been deregulated to open up the supply of electricity to competition. The role of electricity retailing has changed from administrative in integrated utilities to revenue-generation and risk-management in today’s competitive electricity market.
Electricity retailers now offer their customers fixed or variable prices for electricity and manage the risk involved in purchasing electricity from spot markets or electricity pools. In a deregulated market, also called a competitive or liberalized energy market, customers can:
- Choose from several competing electricity suppliers.
- Purchase electricity sourced from renewable energy sources, such as wind or solar.
- Buy other related products and services.
Electric Cooperatives
Electric cooperatives (co-ops), are private, nonprofit utility businesses owned by the customers they serve. Co-ops provide at-cost electric service and are governed by an elected board of directors. The two types of cooperatives include distribution cooperatives and generation and transmission (G&T) cooperatives.
- Distribution cooperatives deliver electricity to their member-owners.
- G&Ts provide wholesale power to distribution co-ops through their own generation or by purchasing power on behalf of the distribution members.
Co-ops are typically established in rural areas that don’t have an investor-owned or municipal utility nearby to supply electric power. Examples of electric cooperatives include Great Lakes Energy Cooperative in Michigan and Dixie Power in Utah.
Energy Services Companies
Energy services companies (ESCOs) design, develop, build, and arrange financing for projects that save energy, reduce energy costs, and decrease operations and maintenance costs at their customers’ facilities. In general, ESCOs act as project developers for a comprehensive range of energy conservation measures (ECMs) and assume the technical and performance risks associated with a project.
Investor-Owned Utilities
Investor-owned utilities (IOUs) are privately owned electricity and natural gas providers that aim to produce a return for investors. IOUs distribute profits to stockholders or reinvest the profits. A public utilities commission regulates and sets the rate with some customer participation. IOUs purchase power through contracts and also have their own generation facilities. They’re the largest type of electric utility and have a complex mix of customers. Examples of IOUs include FirstEnergy in Ohio and Pacific Gas & Electric in California.
Public Utilities
Public or municipality-owned utilities are nonprofit local government agencies. They provide services to communities that recover costs and earn additional returns. Public utilities use the returns to invest in new facilities. Locally elected officials or public employees manage public utilities.
Public utilities can return excess funds to customers through reduced rates, community contributions, and increased operational efficiencies. The utility governing body or city council sets the rates. Public utilities operate their own generation facilities or buy power through contracts. Examples of public utilities include Breckenridge Public Utilities in Minnesota and Burlington Electric Department in Vermont.
Summary
In this unit, you learned about the different types of utility products and how utility companies produce and distribute their products. You also got to know that many types of utility companies operate worldwide, including investor-owned, municipality-owned, and cooperatives. These companies strive to meet the energy, gas, water, and waste needs of communities.
In the next unit, you learn how these companies operate within their markets.