Gas and electric utilities industry

Summary: Utilities are privately or publicly owned companies that provide basic water and power services and commodities vital to the conduct of daily life and, as such, are often regulated by governments.

According to the US Department of Energy (DOE), “A utility can be either a private or publicly owned company that provides a commodity or service that is considered vital to the general public, such as power, water, or gas for heating. Because utility services are considered necessities, utilities are allowed to operate as monopolies and prices and service conditions are regulated by the government or subject to review by citizens.” Considering that utilities can either be private or publicly owned companies, there are a wide variety of ownership models for electric utilities. For example, again according to the DOE, “the utility, distribution company, or retail service provider selling you power may be a not-for-profit municipal entity, an electric co-operative owned by its members, a private, for-profit company owned by stockholders (often called an investor-owned utility), or a power marketer. Some federally-owned authorities—including the Bonneville Power Administration and the Tennessee Valley Authority, among others—also buy, sell, and distribute power.”

It is important to note that there are many business sectors—from exploration and extraction to transmission and distribution—within the gas and electric utilities industry. As explained by the US Energy Information Administration (EIA), “The origin of the electricity you consume may vary. Utilities may generate all the electricity they sell using just the power plants they own. Utilities may also purchase some of their supply on the wholesale market from other utilities, power marketers, independent power producers, or from a market based on membership in a regional transmission reliability organization.”

The history of the electric utility can be traced back to Thomas Alva Edison’s invention of the lightbulb. Shortly thereafter, Edison created a small-scale power plant. As the EIA notes, “Thomas Edison’s Pearl Street electricity generating station, which opened September 4, 1882, in New York City, introduced the industry by featuring the four key elements of a modern electric utility system. It featured reliable central generation, efficient distribution, a successful end use (in 1882, the lightbulb), and a competitive price.”

Utilities in Africa

Africa’s electric utility grid is relatively underdeveloped, with power generation concentrated among a few countries. Although electrification across the African continent remains low, there are trends toward increasing privatization, international investment, and regional electric networks.

Africa’s electric utility grid is underdeveloped in large part, according to Website MBendi Information Services, because of “a combination of droughts, wars and aging equipment [that] has contributed to an irregular and sparse electricity supply in many African countries. … Nigeria is a prime example, operating at approximately one-third of its installed capacity due to aging facilities.” Furthermore, weather patterns have an especially negative impact on Africa’s hydroelectric facilities. Again, according to MBendi, “Africa’s unpredictable weather patterns, usually seen as the scourge of the agricultural sector, have also had their effects on electricity supply. Droughts in East Africa in 1999–2000 had a serious impact on the hydroelectric facilities in the region, with Kenya in particular suffering from severe power shortages. Ghana’s hydroelectric facilities were also adversely affected by droughts during the late 1990s. Cameroon uses 30 diesel stations as back-up power during extended droughts.”

Power generation in Africa is concentrated in Egypt, South Africa, Libya, Morocco, and Algeria and comes mainly from coal-fired power plants. Natural gas is increasingly being used as a power source, however, and hydroelectric power also plays an important role in Africa. This said, according to MBendi, approximately “50 percent of power in Africa is generated from coal based facilities, although this figure is projected to decrease to 36 percent by 2020, with many of the new developments running on natural gas. Hydro electrical power is also a significant contributor, with the hydro potential of the Democratic Republic of Congo alone reported to be sufficient to provide three times as much power as Africa presently consumes.”

In part because of Africa’s concentration of power generation among a few countries, regional connectedness is important. According to MBendi, “Regional networks have occurred both on an informal basis, where neighboring countries simply agree to share, and on a more formalized basis, such as with the Southern African Power Pool (SAPP), where a number of countries have been linked and purchase power at regulated prices. Countries linked through the SAPP network are: South Africa, Mozambique, Zimbabwe, Zambia, Namibia, Botswana, the Democratic Republic of Congo, Swaziland, Tanzania, Lesotho and Malawi. Kenya and Tanzania have recently been discussing a connection to the Zambian power grid, which would bring Kenya into the SAPP.”

Coinciding with increased electricity demand, power generation, and grid connectedness is the role of privatization and international investment in Africa’s electric utility sector. For example, according to MBendi, “AES Corporation purchased 56 percent of Cameroon’s state utility, SONEL, for $70 million in July 2001. The remaining 44 percent will stay under the control of the state. SONEL is one of Africa’s larger power producers.” However, despite recent improvements, electrification remains low in Africa, as “South Africa and Egypt have the continent’s highest electrification levels at approximately 70 percent, while the average for the SADC region is only 20 percent.”

Utilities in Asia

From China and Russia to the Middle East, Asia not only is the largest and most populated continent on Earth but also has some of the richest global endowments of energy resources.

In 2010, Asia was headquarters for several of the largest gas utilities in the world, including five of the top 10 largest global gas utilities: Tokyo Gas Company Limited, GAIL (India) Limited, Osaka Gas Company Limited, Hong Kong and China Gas Company Limited, and Korea Gas Corporation. Furthermore, the largest diversified gas company in the world is the Russian-based company Gazprom Group, which possesses the world’s largest natural gas reserves. Gazprom states the following on its Website: “According to the international PRMS standards the group’s proven and probable hydrocarbon reserves are estimated at 27.3 billion tons of fuel equivalent and valued at $230.1 billion. With 17 percent of the global gas production, Gazprom Group is the leader among the world’s oil and gas companies. In 2008 Gazprom Group produced 549.7 billion cubic meters of gas. . . Gazprom [also] owns the world’s largest gas transmission system capable of uninterrupted and long-distance gas delivery to Russian consumers and abroad. Gazprom gas trunklines stretch 159.5 thousand kilometers. The Company’s 165 gas distribution companies maintain 445.3 thousand kilometers of gas distribution pipelines and secure transportation of 164.3 billion cubic meters of natural gas.”

Three additional energy firms in Asia to take into account are Huaneng Power International, CLP Power Hong Kong Limited, and Tenaga Nasional Berhad. According to the Website Economy Watch, “Huaneng Power International: China’s biggest independent electricity generator produced an impressive output of 42 terawatt-hours in the first quarter of 2009. CLP Power Hong Kong Limited: This firm’s modern network responsible for the production, transmission and distribution of electricity caters to more than 2.2 million customers, which includes over 80 percent of Hong Kong’s population. Tenaga Nasional Berhad: Malaysia’s biggest electricity utility company and the largest power company in southeast Asia.”

It is also important to note that west Asia is home to six of the 12 members of the Organization of Petroleum Exporting Countries (OPEC), including Iran, Iraq, Kuwait, Qatar, Saudi Arabia, and the United Arab Emirates.

Utilities in Europe

In 2022, Europe was headquarters for the largest electric utilities in the world (by revenue), including the five largest: Electricite de France SA, Enel SpA, E.ON SE, Engie, and Iberdrola SA.

Utilities in the United States

The North American gas and electric utility system is dominated by the United States, which is the world’s largest economy and a major energy consumer. The North American Electric Reliability Corporation (NERC) was established, according to the EIA, “to ensure that the grid in the United States was reliable, adequate, and secure. Some NERC members have formed regional organizations with similar missions. These organizations are referred to as Independent System Operators (ISOs) and Regional Transmission Organizations (RTOs). They are part of a national standard design advocated by the Federal Energy Regulatory Commission (FERC). Some have members who connect to lines in Canada or Mexico.”

In addition to the United States’ transmission of electricity, the United States also has a well-developed gas utility sector. To transmit these natural gas resources, there is an extensive system of natural gas pipelines. There are many different types of ownership structures within the electric utility sector. Throughout the United States, there are, according to the EIA, approximately “210 investor-owned electric utilities, 2,009 publicly owned electric utilities, 883 consumer-owned rural electric cooperatives, and nine Federal electric utilities. A small amount of electricity is sold by generating facilities directly to end use customers.”

Investor-owned electric utilities are perhaps the most important form of ownership. As the EIA notes, such utilities operate in every state except Nebraska, and investor-owned electric utilities “represent 6 percent of the total number of electric utilities and approximately 38 percent of utility installed capacity, 42 percent of generation, 66 percent of sales, and 67 percent of revenue in the United States. Investor-owned utilities serve about 100 million ultimate consumers, about 71 percent of the total in the country.”

Despite the importance of investor-owned electric utilities, the vast majority of electric utilities in the United States are actually publicly owned. Such publicly owned electric utilities are, according to the EIA, “nonprofit government entities that are organized at either the local or State level. There are 2,009 publicly owned electric utilities in the United States. They represent about 61 percent of the number of electric utilities, supply approximately 9 percent of generating capability, 8 percent of generation, and account for about 15 percent of retail sales and 13 percent of revenue.”

Cooperative electric utilities, which mainly serve rural areas, are “owned by their members (i.e., the consumers they serve). … There are 883 cooperatives operating in 47 States; none operate in Connecticut, Massachusetts, Rhode Island, or the District of Columbia. Cooperative electric utilities represent about 27 percent of US electric utilities, 10 percent of sales and revenue, and around 4 percent of generation and generating capability.”

Furthermore, there are also nine federal electric utilities in the United States, including the Army Corps of Engineers, the Bureau of Indian Affairs and the Bureau of Reclamation in the Department of the Interior, the International Boundary and Water Commission in the Department of State, the Power Marketing Administrations in the Department of Energy (Bonneville, Southeastern, Southwestern, and Western), and the Tennessee Valley Authority.

Utilities in Oceania

Because Oceania consists mainly of small island nations, there are few large electric or gas utilities. The main exceptions are Australia and Indonesia (although Indonesia could also be considered a Southeast Asian country), both of which are energy-rich nations.

AGL Energy, according to Economy Watch, “is Australia’s biggest electricity retailer. It has a total generation capacity of 1,700 MW (megawatts). The company’s market capitalization stands at $4.8 billion and it caters to over 6 million consumers.”

In contrast, Indonesia’s gas and electric utilities are dominated by state-owned firms. Perusahaan Gas Negara (PGN), Indonesia’s state-owned gas utility, has (according to its Website) “so far distributed gas volumes in excess of more than 800 MMScfd [million standard cubic feet per day], and transmitted volumes up to 840 MMScfd, through its 5,900-km [kilometer] long transmission and distribution pipeline network.” PT PLN (Persero) is Indonesia’s state-owned electric utility company.

Utilities in South America

Electric utilities in South America are concentrated among a handful of large firms and particularly a few international companies, which include AES (a U.S.-based company) along with Endesa and IBERDROLA (both firms based in Europe).

AES, with its ownership of Brazil’s AES Eletropaulo, is, according to AES’s Website, “the largest electric utility in the region, with over 5 million customers [and] has been serving its customers for over 100 years, and today is among the highest performing energy businesses in the region.”

In addition to serving Brazil, South America’s largest country and largest economy, AES also has a large presence in Chile, El Salvador, Argentina, the Dominican Republic, and Panama. As AES puts it, “In Chile, we are the second largest generator of electric power. In El Salvador, AES provides electricity to 80 percent of the country’s power market, including campesinos and remote villages that have never had reliable power before. In Argentina, AES is one of the largest private power generators in the country, producing approximately 12 percent of the country’s total power generation capacity. AES’s two distribution businesses in Argentina serve approximately 474,000 customers in the state of Buenos Aires. In the Dominican Republic, AES Andres is the newest and largest private power generator in the country. The facility is a 319 MW gas-fired plant and LNG regasification terminal.”

Endesa, which is among the largest electric utilities in the world, is, according to its Website, “the leading private electricity multinational in Latin America and the largest electric utility in Chile, Argentina, Colombia, and Peru. It supplies electricity to five of the region’s six largest cities (Buenos Aires, Bogota, Santiago, Lima, and Rio de Janeiro), it owns the CIEN interconnection line between Argentina and Brazil, and has a stake in the SIEPAC electricity interconnection system that will link six Central American countries.”

IBERDROLA, a European firm, has a large presence in South America, stating that it is “firmly committed to the grid business in [Brazil], through the integration of the distribution company Elektro, which has 2.2 million customers and a 105,800 kilometer electric grid. … IBERDROLA will become one of the largest utilities in this country, where it plans to continue developing major hydropower and wind power generation projects.”

Two of the largest Brazilian-based electricity firms are CPFL Energia and Eletrobras. CPFL Energia has a market share in Brazil of 13 percent and, according to its Website, “heads the distribution segment through its eight distributors. All together, these distributors serve 568 municipalities, and in 2010 accounted for the distribution of electric energy to 6.7 million customers in the States of São Paulo, Rio Grande do Sul, Paraná and Minas Gerais.”

Similarly, Eletrobras states that it is “responsible for 42,302 MW of the installed capacity of electric power generation in [Brazil], which represents 36 percent of the total local capacity. There are 37 hydroelectric plants, 127 thermoelectric plants, two wind farms, and two thermonuclear plants. Eletrobras is responsible for 54,104.94 km of transmission lines and 247 substations.”

Bibliography

Black and Veatch. “2011 Electric Utility Survey Results.” www.bv.com/ElectricUtilityTrends/default.aspx.

"The History of Energy in the United States." National Grid, 28 Sept. 2022, www.nationalgrid.com/stories/energy-explained/history-energy-united-states. Accessed 6 Aug. 2024.

National Museum of American History. “Powering a Generation of Change.” americanhistory.si.edu/project-powering-generation-change.

North American Electric Reliability Corporation. “About NERC.” www.nerc.com/AboutNERC/Pages/default.aspx.

Reiff, Nathan. "10 Biggest Utility Companies Worldwide." Investopedia, 24 May 2023, www.investopedia.com/articles/investing/022516/worlds-top-10-utility-companies.asp. Accessed 6 Aug. 2024.

US Department of Energy. “A Primer on Electric Utilities, Deregulation, and Restructuring of US Electricity Markets.” www.pnnl.gov/main/publications/external/technical‗reports/PNNL-13906.pdf.

US Energy Information Administration. “How Electricity Is Delivered to Consumers.” www.eia.gov/energyexplained/index.cfm?page=electricity‗delivery.

World Bank. “Monitoring Performance of Electric Utilities: Indicators and Benchmarking in Sub-Saharan Africa.” documents.worldbank.org/en/publication/documents-reports/documentdetail/112411468002404083/sub-saharan-africa-monitoring-performance-of-electric-utilities-indicators-and-benchmarking-in-sub-saharan-africa.