What is an electric utility?

The electric utility is built to provide reliable and affordable electricity to its customers. There are different business structures for utilities in the United States including Investor-owned utilities (IOUs), electric cooperatives, and municipal utilities.  Investor-owned utilities exist to make a return on investment for their shareholders. These utilities are considered to be natural monopolies and are typically regulated by State Public Service Commissions or Public Utility Commissions (on the distribution level), as well as the Federal Energy Regulatory Commission (on the transmission level). Public utilities include municipal utilities (owned and operated by a municipality), and rural electric cooperatives, which are governed by a local board of directors. In Montana, there are two investor-owned electric utilities, twenty-five rural electric cooperatives, and one municipal utility.

Electric utilities by their nature require large capital expenditures in order to build the utility system of generators, transformers, wires, meters, and all of the associated equipment and controls to assure reliable electricity. Tremendous investment was made early in the last century, both from private investment and from government funding. Safety and reliability are the most important considerations of the electric utility industry, and the industry follows complex codes and standards to maintain safety and reliability of the product to the end users. Electric utilities are (most commonly) interconnected, and theoretically electricity generated on one end of the country could make it all the way to the other end of the country. This interconnected system for the generation, transmission and distribution of electricity is called the electric “grid”.

Electricity is generated by various means, but any kind of electric generation needs some fuel. Fuel can be something that can be burned to make heat that can be converted to electricity, or fuel can be one of various forms of solar energy. Solar energy can be converted directly to electricity by the photoelectric effect, and indirectly through environmental actions; atmospheric pressures cause winds to blow, and wind can be used to rotate turbines and the water cycle, where water evaporated from the oceans is precipitated on the land as rain and snow, and the sheer weight of the water is used to drive rotating turbines in hydroelectric power plants. Nuclear fission is a process where certain elements change in such a way as to make other elements and in this process make heat that can be converted to electricity. In the US, nearly all of our electricity comes from these sources.