Electric Utility Industry Overview

Electric Utility Industry Worldwide Directory

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Electric Utility Industry Overview

Chronology - Electric Utility Industry
The modern electric utility industry began in the 1880s and spread rapidly in the 1890s. From 1901 through 1932, growing economies of scale hastened growth and consolidation in the electric utility industry, as well as the beginnings of State and Federal regulation. Both residential and commercial end use of electricity grew rapidly from 1941 to 1945. In 1949, the Federal Government authorized Tennessee Valley Authority (TVA) to construct thermal-electric power plants for commercial electricity sale. 1950 through 1970 was a time of essentially uninterrupted prosperity for the electric utility industry. Demand for electricity grew rapidly, consistently, and predictably, while electricity prices continued to fall. The Nation's first central station commercial nuclear reactor began operation in 1957. During the 1960s environmental requirements became a noticeable component of electric utility costs.

During the 1970s, the electric utility industry moved from decreasing unit costs and rapid growth to increasing unit costs and slower growth. Production costs increased because of inflation, all fossil-fuel prices rose sharply, environmental legislation increased the costs of building and operating electric utility (particularly coal-fired) power plants. Financing for nuclear projects dried up as safety concerns increased. In February 1979, the Nuclear Regulatory Commission (NRC) shut down five operating reactors over concerns about durability to cope during earthquakes. The Three Mile Island accident occurred in March 1979 and raised further concerns. No new reactor orders were placed after 1978 and orders for 63 reactors were cancelled between 1975 and 1980. In the early 1980s both plant operating costs and electricity prices continued to increase. Demand grew 1% in 1980, 2.5% in 1981, and declined 3% in 1982; the first absolute decline since 1945. From 1980 to 2000 capacity increases exceeded increases in generation.

Electric Utilities
Electric Utilities are public agencies and privately owned companies that generate power for public use. The U.S. electric industry includes over 3,100 electric utilities. Investor owned electric utilities are privately owned, represent 8 percent of the total, approximately 75 percent of utility generating capability, generation, sales, and revenue. Historically, most investor owned electric utilities were operating companies that provide basic services for the generation, transmission, and distribution of electricity. Publicly owned electric utilities are nonprofit local government agencies established to provide service to their communities and nearby consumers at cost. Publicly owned electric utilities include municipals, public power districts, state authorities, irrigation districts, and other state organizations. Municipal electric utilities mostly distribute power, although some large ones produce and transmit electricity as well. There are 2,009 municipal utilities, supplying approximately 10 percent of the generating capability, and accounting for 14 to 15 percent of retail revenue. Cooperative electric utilities are owned by their members and operate in rural areas with low concentrations of consumers. There are 912 cooperatives, operating in 47 States; accounting for 9 percent of total revenue, and around 4 percent of generation and generating capability. Federal electric utilities are not-for-profit, and the power they generate is marketed by TVA and five DOE agencies. Power Marketers are now considered utilities by FERC, because they buy and sell electricity, but do not own or operate generation, transmission, or distribution facilities. Non-utility power producers accounted for 7% of US power generation in 1989. In 1998, they accounted for 11%, 14% in 1999, and 20.6% in 2000. These are privately owned entities that generate power for their own use and/or for sale to utilities and others.

Electric Power Systems
A modern electric power system consists of: the power station; a set of transformers to raise the generated power to the high voltages; the transmission lines; the substations at which the power is stepped down to the voltage used on the sub-transmission and distribution lines; and the transformers that lower the voltage to the level used by the consumer's equipment.

Power Stations
The power station consists of a prime mover, such as a turbine driven by water or steam, which operates a system of electric motors and generators. Most of the world's electric power is generated in steam plants driven by coal, oil, nuclear energy, or gas, with lesser percentages generated by hydroelectric, diesel, and internal-combustion plants. In a fossil-fueled steam turbine, the fuel is burned in a furnace to heat water in a boiler to produce steam.

Transmission Lines
The lines of high-voltage transmission systems are usually composed of wires of copper, aluminum, or copper-clad or aluminum-clad steel and are suspended from tall latticework towers of steel by strings of porcelain insulators.

Distribution Lines
For lower voltage sub-transmission and distribution lines, wooden poles are generally used rather than steel towers. In cities and other areas where open lines create a hazard, insulated underground cables are used for distribution.

Grid System
In most parts of the world, local or national electric utilities have joined in grid systems. The linking grids allow electricity generated in one area to be shared with others. Each pooling company gains an increased reserve capacity; use of larger more efficient generators; and compensation, through sharing, for local power failures.

Fuel Sources - Power Generation
Various sources of energy can be converted into electric energy or electricity. The major or dominant sources include fossil fuels, uranium, and water. Fossil fuels supply about 70 percent of the energy sources for the generation requirements of the nation. Coal, petroleum, and gas are currently the dominant fossil fuels used, other sources include, geothermal energy, wind power, solar thermal energy, and biomass. Coal, petroleum (oil), and natural gas are burned in large furnaces to heat water to make steam that pushes on the blades of a turbine. Natural gas can also be burned to produce hot combustion gases that pass directly through a turbine, spinning the blades of the turbine to generate electricity. Gas turbines are commonly used when electricity utility usage is in high demand. Residual fuel oil, a product refined from crude oil, is used to produce steam to turn a turbine. Nuclear power is a method in which steam is produced by heating water through a process called nuclear fission. In a nuclear power plant, a reactor contains a core of nuclear fuel, primarily enriched uranium. The heat, released by this process, is used to turn water into steam, which in turn spins a turbine that generates electricity. Hydropower, the source for 7% of U.S. electricity generation, is a process in which flowing water is used to spin a turbine connected to a generator. Geothermal, solar, wind, and biomass are other energy sources utilized to generate electric power. Geothermal power comes from heat energy buried beneath the surface of the earth. Solar power is derived from the energy of the sun. Wind power is derived from the conversion of the energy contained in wind into electricity. Biomass includes wood, municipal solid waste (garbage), agricultural and industrial waste.

FUEL SOURCE / ELECTRICITY NET GENERATION

Percentage of Total Generation

	1950	1975	2000	2025
Coal	46.3	44.4	51.8	47.0
Nuclear	0.0	9.0	19.8	9.6
Natural Gas	13.4	15.6	16.1	29.0
Petroleum	10.0	15.1	2.9	0.0
Hydro	30.2	15.8	7.3	5.3
Other	.1	.1	2.1	9.1

Note: Percentages do not total due to rounding Source: EIA

Government Influences
Federal legislation has been shaping the electric power industry since its early years. Three acts have had the most profound effect on the industry structure. Public Holding Company Act of 1935 (PUHCA) was aimed at breaking up the unconstrained and excessively large trust that then controlled the Nation’s electric and gas distribution network. The Public Utility Regulatory Policies of 1978 (PURP) was passed primarily in response to the 1973/1974 oil embargo. The objectives of the act were to reduce the U.S. dependence on foreign oil, increase conservation of electric energy, increase efficiency in the use of facilities and resources by electric utilities, provide equitable retail rates for electric consumers; and provide for the expeditious development of hydroelectric power. The Energy Policy Act of 1992 (EPACT) reformed PUHCA and made it easier for the non-utility generator to enter the wholesale market, added a new category of power producer Exempt Wholesale Generator (EWG). Utility-affiliated and nonaffiliated power producers were allowed to build new non-rate based power plants and utilities were not required to purchase this power, only to provide open access to their transportation systems. In April 1996, the FERC issued two final rules, 888 and 889, implementing EPACT's provisions for open access to transmission lines. Rule 888 addresses equal access to the transmission grid for all wholesale buyers and sellers, transmission pricing, and the recovery of stranded costs. Rule 889 requires jurisdictional utilities that own or operate transmission facilities to establish electronic systems to post information about their available transmission capacities.

Electric Power Industry Restructuring
The electric power industry is transitioning from highly regulated, local monopolies which provided their customers with a total package of all electric services towards competitive companies that provide the electricity while utilities continue to provide transmission and/or distribution services. Continuing deregulation at both Federal and State levels will eventually increase competition in its generation and service components, and change the nature of the way electricity is priced, traded, and marketed in the U.S.

Future Growth Prospect - U.S.
The Energy Information Administration (EIA) projects an increase in electricity generated from 3,799 billion kiloWatt-hours in 2000 to 5,252 billion kiloWatt-hours in 2025. This is an average annual increase of 1.9 %. The largest annual percentage growth in the amount of electric generated is in natural gas 5% followed by coal at 1.6%. The amount of power generated as a percentage of total from nuclear and petroleum is projected to be about flat, with a 7% increase in renewables. Natural gas leads all fuels in real growth as a percentage of total power generated, increasing from 16.1% in 2000 to 29.0% in 2025.

Future Growth Prospect International
The Energy Information Administration (EIA) projects an increase in International Electricity consumption from 12,833 billion kiloWatt-hours in 1999 to 22,407 billion kiloWatt-hours in 2020. This is an average annual increase of 2.7%. The largest percentage growth in fuel used is projected to be in natural gas by 117%, followed by coal at 32%. The amount of power generated as a percentage of total from nuclear and petroleum is projected to be about flat, with a 56% increase in renewables.

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