The primary participants in this industry grouping are government establishments which regulate, license and inspect utilities. The utility operations include the generation and delivery of electricity regardless of fuel, and the delivery of gas, water and sewer services.
Regulation and Administration of Communications, Electric, Gas, and Other Utilities
Utility operations directly affect almost everyone in the United States. The way they do business and how much they charge for their services is determined by federal, state and municipal commissions through a complex series of often overlapping regulations. Utility services include water, sewer facilities, electricity, natural gas, telephone, and cable television. The industry participants also monitor and regulate air and water quality and nuclear reactors. The U.S. Department of Energy's spending totaled $21.8 billion in 2002. Of this amount, $2.7 billion was earmarked for energy resources and $3.3 billion for science and technology. Spending in these categories was expected to remain relatively constant in 2003 and 2004. These dollars include, but are not limited to, regulation, monitoring, and research for alternative energy.
Of increasing interest and concern over the years is whether commodities which, at one time, were optional indulgences to make life easier or more enjoyable, but which now have become absolute necessities in today's world, should be regulated by any government entity, or should be left alone to operate within the free enterprise system upon which capitalism is built. The answer lies somewhere in between. In recent years, governmental "deregulation" of utilities has been both contentious and problematic in many areas. However, it has ostensibly served to control price gouging and unfair market practices by utilities owners and suppliers.
The following organizations are the main national regulatory commissions:
The Federal Energy Regulatory Commission (FERC), which was established in 1977, replaced the Federal Power Commission (FPC) which was formed in 1935. FERC controls all electric generation, distribution, and transmission involving wholesale transactions.
The Nuclear Regulatory Commission (NRC), which replaced the Atomic Energy Commission, was established in 1975. The NRC regulates all nuclear generation power plants and the transport and disposal of nuclear waste.
The Federal Communications Commission (FCC) consolidated the telecommunications authority of the Federal Radio Commission (1927) and the Interstate Commerce Commission in 1934. The FCC regulates telephone and telegraph services, satellites, broadcast and cable television, and newspapers.
The Environmental Protection Agency came into being in 1970 as an independent agency of the federal executive. It consolidated all federal environmental laws into a single administrative body.
The National Association of Regulatory Utility Commissioners (NARUC) provides a forum for state and municipal regulators.
The evolution of the current regulatory system began with a concept referred to by Paul Gioia in an April 1989 issue of Public Utilities Fortnightly as "the regulatory compact." By the beginning of the twentieth century, utility services were seen as essential to the welfare of the public and the growth of the economy. Since their intricate distribution systems required large investments of capital and public lands for right-of-ways, control of such early utilities became concentrated in a few hands. This tendency toward a "natural monopoly" prompted experiments in utility regulation that continue today.
The extensive land requirements of transmission systems gave control of most gas, water and electric utilities to municipal governments before the turn of the century. This was primarily because, by 1880, most states turned over control of public streets to their cities. However, U.S. law required special permits or franchises for the use of such public property. Consequently, the municipalities controlled the privately owned utilities by granting franchises and sought to maintain control through competition by issuing overlapping franchises. This system predominated between 1879 and 1907, but complaints of excessively high prices, poor service, discriminatory marketing practices, and unsafe systems sparked public investigations that resulted in regulatory changes.
Matters came to a head in New York State when Charles Evans Hughes was elected governor. Despite the findings of his own investigation a year earlier, which confirmed all the charges against private utilities, Hughes favored continuing the system and adding a strong regulatory oversight commission manned with a professional staff. He had been opposed by William Randolph Hearst who proposed public ownership of all utilities. By 1907, however, Hughes established the first public utility commission. Wisconsin did the same and was followed by 27 other states between 1907 and 1914.
These policies shifted power away from the municipalities into the hands of state regulatory commissions...