Resources for Improving Utilities Operations

  • What are Utilities?

    Utilities provide basic (in today’s standards) needs to both urban and rural customers. Typically, the utilities industry can be segmented into four groups:

    1. Energy Generation or Production:
    Generators build, operate and maintain facilities that produce and/or refine energy, from a source of primary energy (oil, natural gas, coal, solar, wind, water, etc.).

    2. Energy Networks:
    Energy network operators maintain electrical grids, pipelines and/or substations, and develop the infrastructure needed for energy to be distributed on a massive scale to retail customers. Network operators are heavily regulated (although deregulation has occurred in recent years) and do not face a great amount of competition (natural monopoly).

    3. Energy Marketing:
    Energy marketers and traders buy and sell energy (electricity and natural gas) commodities in bulk and assist in moving it from producers, to retailers and, finally, to end users.

    4. Energy Retailers/Providers:
    Energy retailers facilitate the final step in the process (or, value stream) of moving energy from producers to consumers. They market their services to potential customers and bill them based on market prices for energy or natural gas.
  • The History of Utilities

    A prevailing theme throughout the development of man has been the need for energy. Before the age of water power, people relied on self-generated power (i.e., arms and legs) or the strength of domesticated animals (horse, oxen, etc.) to produce energy. Early primary energy sources included wood and other kindling used to create heat and provide lighting. The Mesopotamians, Egyptians, Romans and Chinese were able to harness the potential of moving water to produce energy, starting as early as 200 B.C.

    The Industrial Revolution of the 18th and 19th centuries created the need for more efficient sources of energy to power factories and machine tools. The dominant primary source of energy shifted from wood, and other kindling, to coal. James Watt’s steam engine, patented in 1781, was the driving force behind the increased production and efficiency of the Industrial Revolution. The Second Industrial Revolution (which took place during second half of the 19th century, until World War I) was driven by electricity. Thomas Edison patented the first system for the distribution of electricity in 1880.

    Philadelphia created the first municipally owned natural gas distribution company in 1836 (Philadelphia Gas Works), but it was not until the end of the 19th century, however, that energy became widely offered to the public and other third parties. Initially, the only use of natural gas and electrical power was lighting, but the development of electric motors, communication technology, heating systems and other appliances created additional demand. The use of electrical appliances grew throughout the 20th century, creating a massive market for the use of electricity and natural gas.
  • Modern Trends in Utilities

    Due to the naturally monopolistic nature (high cost of entry into market, high consumer demand for energy) of energy services, the natural gas and electric industries were highly regulated by the federal government up until the 1980’s. Deregulation has created more competition among energy retailers, driving down the cost of power for the consumer. Sustainable, or renewable, energy (wind, solar, geothermal, etc.) use is on the rise, however significant technological and scientific advances, as well as fundamental changes to the way that people consume energy, must be made before these “green” energy sources can surpass traditional forms of energy as the driving force of the global power supply.

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