An electric utility
is a company (often a public utility
) that engages in the generation
, and distribution of electricity
for sale generally in a regulated market
. The electrical utility industry is a major provider of energy
in most countries. Electricity is an integral part of life in the Developed world
. It is indispensable to factories, commercial establishments, homes, and even most recreational facilities. Lack of electricity causes not only inconvenience, but also economic loss due to reduced industrial production.
Electric utilities include investor owned, publicly owned, cooperatives, and nationalized entities. They may be engaged in all or only some aspects of the industry. Electricity markets are also considered electric utilities--these entities buy and sell electricity, acting as brokers, but usually do not own or operate generation, transmission, or distribution facilities. Utilities are regulated by local and national authorities.
Utility service territories are typically geographically distinct from one another. These territories may be set by regulation or by economics as the capital cost of reproducing infrastructure is usually prohibitive. Each territory is composed of different types of consumers, usually broadly described as either commercial, residential or industrial.
Electricity consumers are divided into classes of service or sectors (residential, commercial, industrial, and other) based on the type of service they receive. Sectoral classification of consumers is determined by each utility and is based on various criteria such as:
- demand levels
- rate schedules
- distribution voltage
- accounting methods
- end-use applications
- other social and economic characteristics
Utilities typically employ a number of tariffs. The alternative tariffs reflect consumers' varying consumption levels and patterns and the associated impact on the utility's costs of providing the service.
An electric power system is a group of generation, transmission, distribution, communication, and other facilities that are physically connected. The flow of electricity with the system is maintained and controlled by dispatch centers
. It is the responsibility of the dispatch center to match the supply of electricity with the demand. In order to carry out its responsibilities, the dispatch center is authorized to buy and sell electricity based on system requirements. The interconnected utilities within each power grid coordinate operations and may buy and sell power among themselves. The bulk power system makes it possible for utilities to engage in wholesale (for resale) electric power trade. Wholesale trade has historically played an important role, allowing utilities to reduce power costs, increase power supply options, and improve reliability. Authority for those transactions has been pre-approved under interconnection agreements signed by all the electric utilities physically interconnected or with coordination agreements among utilities that are not connected.