The ABCs of Utility Companies

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join solar revolutionMost of the time your relationship with your electrical utility company is pretty straightforward, but what happens when that relationship changes because you’ve installed solar on your property? The type of utility you have has a big impact on how your solar energy production is measured and accounted for when you have a solar electric  system installed. The first step in understanding your relationship to your utility is understanding what kind of utility company you have.

A utility provides a commodity or service that is vital to the general public. Utility companies are in charge of bringing you power, water, or natural gas. Traditionally, utilities are expected to achieve three goals: production or generation, transmission, and distribution. Utilities that serve consumers can be divided into two main categories: public and private.

Private Utilities: Investor Owned Utilities (IOU)

IOUs function like most companies, they issue stock to investors and their goal is to be profitable for those investors. Most IOUs are regulated on the state level by a public commission (sometimes called a Public Utilities Commission (PUC) or a Public Service Commission (PSC)). The idea behind regulating utilities  is to prevent unreasonable prices and to ensure that they respond to consumer needs. The majority of IOUs own resources for generation, transmission and distribution but only a handful own enough generation resources to meet all of their customers needs independently. One example of an IOU is NV Energy,  acquired by Berkshire Hathaway Energy in 2013, the company serves about 1.3 million customers in Nevada.  As of 2014, Nevada’s NV Energy was the leader amongst American IOUs in use of renewable energy with 21 percent of retail electricity sales coming from renewable sources.

Public Utilities: Publicly Owned Utilities (POU)

POUs are unique because they have a more direct relationship with their customers. POUs are generally organized as either  member-owned cooperatives or are municipally-owned. In the case of cooperatives, the owners of the company are the customers – an example is the Energy Cooperative of America that serves customers in New York and Pennsylvania.  In a municipality owned POU, the customers are the residents of the municipality, as in the case of Austin Energy. As a result of this more direct relationship between the owners of the company and those they serve, POUs are generally unregulated, the assumption being that they will have their consumers best interest at heart. When a utility market is called “deregulated” it is referring to policy efforts to allow for more competition by including POUs. POUs generally do not own their own generation or transmission capabilities. Instead, they rely on other publicly owned generation and transmission utilities or IOUs to accomplish those goals for them.

Status of Deregulation of Electricity by State as of 2010 Source: U.S. Energy Information Administration

Status of Deregulation of Electricity by State as of 2010 Source: U.S. Energy Information Administration

According to Public Power there are 3,200 electricity utilities in the U.S. as 2012. 192 of them are IOUs, 2,880 are POUs, but nearly 70 percent of customers get their electricity from IOUs.

A third kind of utility exists, but most customers won’t have any interaction with it. Power Marketing Agencies (PMAs) are federally owned utilities that generally sell electricity, wholesale, to POUs. A famous example of a PMA is the Tennessee Valley Authority. Some states have their own PMAs, like New York’s New York Power Authority.

The EnergySage Marketplace can help you find the best deal on going solar, no matter where you live in the country. 

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