With market liberalization, consolidation, internationalization, pressure on prices and the need for improvement of efficiency and affectivity, the utilities industry is swiftly changing. The need for massive new investment in capacity and infrastructure has prompted cross-border investment in what were previously purely domestic operations. Further, the power sector is being transformed by measures designed to address the climate change implications of carbon emissions..
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Power and Utility "Article"
the electric utility industry is mammoth in size. In 2009, the U.S. electricity industry supplied 4.0 million gig watt hours (GWh), of which 70.2% was from combustible fuels. The International Energy Agency predicts that electricity demand will double over the next 25 years. Not only will that require a lot of electricity generation from nuclear and coal , but it will also require a significant investment in the transmission lines, substations, meters, and other equipment and services that bring electricity into the homes and businesses that depend on it. The transmission and distribution of electricity is the core business of electric utilities. The electricity industry value chain consists of four elements. First, there is energy generation, requiring both a fuel source (e.g., coal, nuclear, natural gas, wind energy)) and a power plant to convert that fuel source into electricity. Second, electricity transmission involves both transforming generated electricity into electricity that can be transmitted over power lines and matching end user requirements (demand) with energy availability (supply). After transmission, electricity must be distributed to individual end users via a vast network of power lines and substations. Electric utilities often own miles of power and transmission lines-- PG&E, the nation's 2nd largest utility, owns over 100,000 miles of distribution lines alone. Lastly, there is delivery, where electricity is transformed again and delivered directly to an end user. Delivery also involves metering and billing.
Understanding the business of electric utilities requires understanding which parts of the value chain they control-- and which parts they don't. As indicated by the explanation above, electricity is a natural monopoly--there is typically only one power line connected to your house. While one company may own that power line, they do not have a lot of say in the prices they charge due to government regulations. If prices went up would you switch utility companies? That would be difficult to impossible, depending on where you live.