Beatrice Lang
The reporting structure for electric companies varies depending on the country and state. In the United States, the Federal Energy Regulatory Commission (FERC) is an independent agency that regulates the interstate transmission of electricity, natural gas, and oil. FERC has jurisdiction over non-federal hydropower projects and limited authority over the siting of electric transmission facilities within designated National Interest Electric Transmission Corridors. State Public Utility Commissions are primarily responsible for authorizing the construction and maintenance of power-generating plants and transmission lines. In Texas, for example, there are three types of electricity providers: cities, cooperatives, and private companies. Municipally-owned electric companies are typically not overseen by state regulators, while private companies are regulated by the Public Utility Commission (PUC).
| Characteristics | Values |
|---|---|
| Electricity providers in the US | Investor-owned utilities, publicly run or managed utilities, and cooperatives |
| Number of electric distribution companies in the US in 2017 | 3,000 |
| Number of customers served by investor-owned utilities in 2017 | 72% of US electricity customers |
| Largest investor-owned utilities in 2017 | Pacific Gas and Electric, Southern California Edison Company |
| Publicly owned utilities | Federal, state, and municipal-run utilities |
| Largest publicly owned utilities | Puerto Rico Electric Power Authority, Los Angeles Department of Water and Power |
| Cooperatives | Not-for-profit, member-owned utilities; prevalent in rural areas |
| Electricity network operators | Independent Distribution Network Operator (IDNO) |
| Federal regulator | Federal Energy Regulatory Commission (FERC) |
| State regulator | Public Utility Commissions |
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What You'll Learn
Federal Energy Regulatory Commission (FERC)
The Federal Energy Regulatory Commission (FERC) is an independent regulatory agency within the United States Department of Energy. FERC was established by Congress in 1920 as the Federal Power Commission (FPC) to coordinate federal hydropower development. In 1935, the FPC became an independent regulatory agency with jurisdiction over hydropower, interstate electricity, and natural gas pipelines and sales.
FERC's basic mandate is to regulate wholesale electricity prices and ensure that consumers have access to reliable, safe, secure, and economically efficient energy at a reasonable cost. FERC is responsible for hearing appeals on DOE oil price control decisions and conducting "on-the-record" hearings for the DOE. When the DOE proposes a new rule, it must refer the proposal to FERC, which can take over the proceeding if it determines that the rulemaking may significantly impact matters within its jurisdiction.
FERC has the power to issue orders, such as Order No. 841, which required wholesale markets to open up to individual storage installations regardless of their interconnection point. This order was challenged by state public utility commissions and others, who argued that FERC overstepped its jurisdiction by regulating how local electric distribution and behind-the-meter facilities are administered. However, a United States court of appeals upheld Order 841 and dismissed the complaints.
FERC is self-funded, with its budget set by Congress through appropriations, and it is authorized to raise revenue through charges to the natural gas, oil, and electric industries it regulates. FERC operates independently of the Department of Energy's political structure, but its decisions are reviewable by the federal courts.
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State Public Utility Commissions
Electric companies in the United States are classified into three ownership types: investor-owned utilities (IOUs), publicly-run or managed utilities, and cooperatives (co-ops). IOUs are large electric distributors that issue stock owned by shareholders and tend to be very large, serving three out of every four utility customers nationwide. Publicly-run or managed utilities include federal, state, and municipal-run utilities, while co-ops are not-for-profit, member-owned utilities that are most prevalent in rural areas.
The first state utility regulator was the Public Service Commission of Wisconsin, founded in 1907. Today, each state has its own PUC, and these commissions are represented by the National Association of Regulatory Utility Commissioners (NARUC). NARUC, founded in 1889, is a non-profit organization dedicated to ensuring fair, just, and reasonable rates for essential utility services such as energy, telecommunications, power, water, and transportation. NARUC members are responsible for assuring reliable utility services and have urged citizens and businesses to call 811 before starting outdoor projects to avoid accidents and utility interruptions.
The EIA collects a variety of data from utilities through forms like the Annual Electric Power Industry Report (Form EIA-861) and its short form (Form EIA-861S) to gather information on generating capacity, monthly generation, sales, revenues, and customer counts. This data is used to monitor and regulate the industry, with the goal of protecting consumer interests and ensuring fair and reliable utility services.
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Municipal electric companies
Electric companies in the United States fall under three ownership categories: investor-owned utilities (IOUs), publicly run or managed utilities, and cooperatives. IOUs are large electric distributors that issue stock owned by shareholders. They served 72% of US electricity customers in 2017, with the two largest IOUs being in California: Pacific Gas and Electric and Southern California Edison Company.
Publicly owned utilities, or POUs, include federal-, state-, and municipal-run utilities. In addition, political subdivisions may run POUs, also called public utility districts—utilities that residents vote into existence and that operate independently of city or country government. The United States has 1,958 POUs with an average of 12,100 electricity customers each. The largest POU is the state-run Puerto Rico Electric Power Authority (PREPA), with 1.47 million customers, followed by the Los Angeles Department of Water and Power, a municipal utility with 1.43 million customers.
In the late 1800s and early 1900s, municipalities ran most utilities, and more than 3,000 existed by 1923. However, technological improvements in generation and transmission later made smaller plants uneconomical, and many cities sold their equipment and transferred their customers to IOUs. Today, cooperatives, or co-ops, are still most prevalent in rural areas, often bringing electricity to communities not covered by IOUs or municipal utilities.
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Electric cooperatives
Co-ops serve 42 million people across the United States, including 92% of persistent poverty counties. They power over 22 million businesses, homes, schools, and farms in 48 states and return more than $1 billion to their consumer-members annually. There are 832 distribution cooperatives that form the foundation of the electric cooperative network, delivering electricity and other services to co-op members. Additionally, 64 generation and transmission cooperatives (often called G&Ts) provide wholesale power to distribution co-ops through their own electric generation facilities or by purchasing power on behalf of distribution members.
Co-op members have a say in operational matters such as rate increases, infrastructure investment, and budget surplus allocation. Surpluses may be distributed as credits spread across all members, rather than going to shareholders as profits. Many electric cooperatives were created by the New Deal to bring electric power to rural areas that were not served by investor-owned utilities due to insufficient expected revenue. Today, cooperatives are still most prevalent in rural areas, and their high costs of maintaining infrastructure to cover large areas without a rich customer base often leads to high prices.
Cooperatives are working to meet member expectations by reducing emissions through emission-reduction measures and transitioning to natural gas and renewables. Between 2005 and 2022, co-ops reduced sulphur dioxide emissions by 83%, nitrogen oxide emissions by 68%, and carbon dioxide emissions by 14%. They have also been increasing their renewable capacity, with plans to add more than 5.3 gigawatts of renewable capacity by 2027.
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State regulators
Electric companies in the United States report to various entities, depending on their ownership structure and the state in which they operate. One key regulator for electric companies is the state Public Utility Commissions (PUCs). Each state has its own PUC, which is responsible for authorizing the construction and maintenance of power-generating plants and transmission lines within its jurisdiction. These commissions have the authority to regulate investor-owned utilities, publicly-owned utilities, and cooperatives.
Investor-owned utilities (IOUs) are large, for-profit electric distributors that issue stock owned by shareholders. They served about 72% of U.S. electricity customers in 2017 and are most prevalent in heavily populated areas. IOUs are subject to state regulation and oversight by the respective PUCs. For example, the Georgia Power Company (GPC), an investor-owned utility, is fully regulated by the state commission in Georgia.
Publicly-owned utilities (POUs) include federal, state, and municipal-run utilities. They are owned and operated by government entities or political subdivisions. POUs are also subject to state regulation, and the respective PUCs may have oversight over their operations and rates.
Cooperatives, or co-ops, are not-for-profit, member-owned utilities that are prevalent in rural areas. Farmer cooperatives formed to bring electricity to communities not covered by IOUs or municipal utilities. While co-ops operate independently, they may still be subject to some regulatory oversight by the state PUCs.
Additionally, it is important to note that the Federal Energy Regulatory Commission (FERC) also plays a role in regulating certain aspects of the electric industry. FERC has jurisdiction over non-federal hydropower projects and specific electric transmission facilities within designated National Interest Electric Transmission Corridors. FERC also oversees wholesale power transactions on the eastern and western interconnects. However, the primary responsibility for regulating electric companies lies with the state PUCs, which tailor their regulations to the specific needs and characteristics of their state.
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Frequently asked questions
Electric companies in the US report to the Federal Energy Regulatory Commission (FERC).
FERC is an independent agency that regulates the interstate transmission of electricity, natural gas, and oil. FERC also reviews proposals for liquefied natural gas terminals and interstate natural gas pipelines, as well as licensing hydropower projects.
Municipally-owned electric companies are not overseen by state regulators. In Texas, for example, customers with concerns about a municipal provider should contact the administrators of the co-op.
Investor-owned electric utilities, such as the Georgia Power Company, are regulated by the Commission.
The responsibility for authorizing the construction and maintenance of power-generating plants and transmission lines primarily resides with the state Public Utility Commissions. Once electricity projects become operational, safety is regulated, monitored, and enforced by the state.
