public utility

1. A private business organization, subject to governmental regulation, that provides an essential commodity or service, such as water, electricity, transportation, or communication, to the public.
2. Stock shares issued by a company providing essential public services. Often used in the plural.

A for-profit company that, because of the nature of its business, has characteristics of a natural monopoly. For instance, an electric company will have a natural monopoly over the sale of electric power in a given area, since having a single supplier of electricity for that area is the most efficient method of producing and distributing electricity. Because no free market or competition exists for the services or goods sold by public utilities, they are subject to government regulation of the price they may charge and the means by which they may distribute their goods. The concept of natural monopoly is currently being challenged, and deregulation of utilities, permitting competition, now seems a likely possibility in the near future.

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A public service such as water, gas, electricity, telephone, sewers, etc.

In the United States, public utilities supply consumers with electricity, natural gas, water, telecommunications, and other essential services. Government regulation of these utilities considered vital to the "public interest" has waxed and waned. In the nineteenth century, canals, ferries, inns, gristmills, docks, and many other entities were regulated. However, in the early twentieth century, emerging electric companies initially avoided regulation These rapidly growing power companies often merged, creating monopolies that controlled the generation, transmission, and distribution of electric power. By 1907, entrepreneur Samuel Insull of Chicago Edison had acquired twenty other utility companies. He and others argued that building multiple transmission and distribution systems would be costly and inefficient. Nevertheless, reformers clamored for state regulation of the monopolies. By 1914, forty-three states had established regulatory polices governing electric utilities. Insull and other electric power "barons" found a way past regulation by restructuring their firms as holding companies. A Holding Company is a corporate entity that partly or completely controls interest in another (operating) company. Throughout the 1920s, holding companies bought smaller utilities, sometimes to the point that a holding company was as many as ten times removed from the operating company. Operating companies were subject to state regulation, holding companies were not. Holding companies could issue new stock and bonds without state oversight. This pyramid structure allowed holding companies to inflate the value of utility securities. Consolidation of utilities continued until, by the end of the 1920s, ten utility systems controlled three-fourths of the electric power in the United States. Utility stocks, considered relatively secure, were held by millions of investors, many of whom lost their total investment in the stock market crash of 1929.

Public Utility Holding Company Act

With strong support from President Franklin D. Roosevelt, Congress passed the Public Utility Holding Company Act (PUHCA) in 1935. PUHCA outlawed interstate utility holding companies and made it illegal for a holding company to be more than twice removed from its operating subsidiary. Holding companies that owned 10 percent or more of a public utility had to register with the Securities and Exchange Commission and provide detailed accounts of all financial transactions and holdings. The legislation had a swift and dramatic effect. Between 1938 and 1958 the number of holding companies fell from 216 to eighteen. This forced divestiture continued until deregulation of the 1980s and 1990s.

Deregulation

Many politicians and economists argued that the marketplace, not government regulation, should determine utility prices. Many consumers also sought lower prices through Deregulation. Near the end of the twentieth century, while government oversight of safety remained, price and service regulation were removed from several industries, including telecommunications, transportation, natural gas, and electric power. As a result, new services and lower prices were often introduced. The increased competition among investor-owned utilities also led to mergers and acquisitions and a concentration of ownership. Deregulation is also credited with the rise of unregulated power brokers, such as Enron, whose historic collapse in 2002 laid bare the vulnerability of consumers and investors when corporations control essential public services. About a dozen states repealed or delayed their deregulation laws; many consumer groups maintained that PUHCA's protections should be reinstated.

Bibliography

Euromonitor International. "Electric Power Distribution in the United States." http://www.MarketResearch.com.

Lai, Loi Lei. Power System Restructuring and Deregulation. New York: Wiley, 2001.

Warkentin, Denise. Electric Power Industry in Nontechnical Language. Tulsa, Okla.: Penn Well Publishers, 1998.

Businesses that provide the public with necessities, such as water, electricity, natural gas, and telephone and telegraph communication.

A public utility is a business that furnishes an everyday necessity to the public at large. Public utilities provide water, electricity, natural gas, telephone service, and other essentials. Utilities may be publicly or privately owned, but most are operated as private businesses.

Typically a public utility has a monopoly on the service it provides. It is more economically efficient to have only one business provide the service because the infrastructure required to produce and deliver a product such as electricity or water is very expensive to build and maintain. A consequence of this monopoly is that federal, state, and local governments regulate public utilities to ensure that they provide a reasonable level of service at a fair price.

A public utility is entitled to charge reasonable rates for its product or service. Rates are generally established according to statutes and regulations. The utility usually files a proposed rate schedule with the state public utility commission for approval. The commission holds public hearings to help decide whether the proposed schedule is fair. The commission may also require increased levels of service from the utility to meet public demand.

Until the 1930s public utilities were subjected to minimal regulation. The enactment of the Public Utility Holding Company Act of 1935 (49 Stat. 803 [15 U.S.C.A. §§ 79-92z-6]) signaled a change. A holding company is one that owns stock in, and supervises management of, other companies. The law regulates the purchase and sale of securities and assets by gas and electric utility holding companies and limits holding companies to a single coordinated utility system. The law ended abuses that allowed a small number of public utilities to control large segments of the gas and electricity market and to set higher utility rates.

Public regulation of utilities has declined since the late 1970s. Public policy is now based on the idea that competition rather than regulation is a better way to manage this sector of the economy. Airline and telephone deregulation are the most prominent examples of this shift in philosophy. Telephone deregulation was enabled by a 1982 agreement between American Telephone and Telegraph Company (AT&T) and the federal government. The federal government had sued AT&T, alleging that its monopoly on virtually all telephone service in the United States was illegal. AT&T agreed to divest itself of all local telephone companies, while retaining control of its long-distance, research, and manufacturing activities. This resulted in the creation of seven regional telephone companies with responsibility for local telephone service. Other companies now compete with AT&T for long-distance service.

At the federal level, numerous commissions oversee particular types of public utilities. These include the Federal Energy Commission, the Nuclear Regulatory Commission, the Federal Communications Commission, and the Securities and Exchange Commission.

See: nuclear power; telecommunications.

A private company supplying water, gas, electricity, telephone service, or the like, which is granted a monopoly by the government and then regulated by the government.

"Utilities" redirects here. For other uses, see Utility (disambiguation).

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The examples and perspective in this article deal primarily with the United States and do not represent a worldwide view of the subject. Please improve this article and discuss the issue on the talk page.

Look up utility in Wiktionary, the free dictionary.

A public utility (usually just utility) is an organization that maintains the infrastructure for a public service (often also providing a service using that infrastructure). Public utilities are subject to forms of public control and regulation ranging from local community-based groups to state-wide government monopolies. Common arguments in favor of regulation include the desire to control market power, facilitate competition, promote investment or system expansion, or stabilize markets. In general, though, regulation occurs when the government believes that the operator, left to his own devices, would behave in a way that is contrary to the government’s objectives. In some countries an early solution to this perceived problem was government provision of the utility service. However, this approach raised its own problems. Some governments used the state-provided utility services to pursue political agendas, as a source of cash flow for funding other government activities, or as a means of obtaining hard currency. These and other consequences of state provision of utility services often resulted in inefficiency and poor service quality. As a result, governments began to seek other solutions, namely regulation and providing services on a commercial basis, often through private participation.^[1]

The term utilities can also refer to the set of services provided by these organizations consumed by the public: electricity, natural gas, water and sewage. Telephone services may also be included.

In the United States of America they are often natural monopolies because the infrastructure required to produce and deliver a product such as electricity or water is very expensive to build and maintain.^[2] As a result, they are often government monopolies, or if privately owned, the sectors are specially regulated by a public utilities commission.

Developments in technology have eroded some of the natural monopoly aspects of traditional public utilities. For instance, electricity generation, electricity retailing, telecommunication and postal services have become competitive in some countries and the trend towards liberalization, deregulation and privatization of public utilities is growing, but the network infrastructure used to distribute most utility products and services has remained largely monopolistic.

Public utilities can be privately owned or publicly owned. Publicly owned utilities include cooperative and municipal utilities. Municipal utilities may actually include territories outside of city limits or may not even serve the entire city. Cooperative utilities are owned by the customers they serve. They are usually found in rural areas. Private utilities, also called investor owned utilities, are owned by investors.^{[citation needed]} Unlike public companies, private utilities may be listed on the stock exchange.^{[citation needed]} Private, in this context, means not owned by the public or the government.

In poorer developing countries, public utilities are often limited to wealthier parts of major cities, as used to be the case in developed countries in the nineteenth century, but in some developing countries utilities do provide services to a large share of the urban population, such as in the case of water and sanitation in Latin America.

Contents 1 Common classifications of utilities in the United States 2 See also 3 References 4 External links

Common classifications of utilities in the United States

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• CWD – County Water District
• FCWCD – Flood Control and Water Conservation District
• FWSD – Fresh Water Supply District
• ID – Irrigation District
• IOU - Investor-owned utility
• MWA – Municipal Water Authority
• MWD – Municipal Water District
• MUD – Municipal Utility District
• POU - Public-owned Utility
• PUD – Public Utility District
• WA – Water Agency
• WCID – Water Control and Improvement District
• WD – Water District
• WS – Water System
• WSC – Water Supply Corporation

See also

• Lists of public utilities
• Electric utility
• Telephone company
• Water industry

• Common utility duct
• Electricity market
• Energy
• Firm service
• Liberalization
• NAICS 22
• American Public Power Association
• National Rural Water Association
• Off-the-grid
• Public services
• Rate Case
• Telecommunications
• Universal service
• Utility cooperative
• Infrastructure

References

1. ^ Body of Knowledge on Infrastructure Regulation
2. ^ West's Encyclopedia of American Law

External links

• refabrica.com - Latest News in Utilities and Information Technology

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