Types of Utility Companies

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Utility companies provide power, water, heat and other necessities.
Utility companies provide power, water, heat and other necessities. (Image: Securing Power Lines image by Karin Lau from Fotolia.com)

Utility companies are public or private organizations that provide electricity, water, heat, communications access or any other commodity required by a large amount of people in order to survive. Today, utility companies tend to fall into one of three different types, each of which get their operational funding from a different source and operate in a slightly different way.

Publicly Owned UItilities

Publicly owned utilities are owned by cities, counties or states. They produce their resources and then sell them either to individual people or to other utilities. Publicly owned utilities are overseen by the Federal Energy Regulatory Commision (FERC). These utilities are not-for-profit organizations intended to provide power, water or heat to people at a low cost. They are managed by public employees and are supposed to operate with full public transparency. Publicly owned utilities typically offer services at much lower prices than other types of utilities.

Investor-Owned Utilities

Investor-owned utilities (IOUs) are privately owned companies run by their shareholders. Most IOUs are focused more on the delivery of utilities as opposed to the production of it. IOUs tend to have much larger engineering staffs, information technology (IT) departments and much larger operating budgets than any other type of utility company. One of the advantages of this type is that it tends to make decisions and move ahead with projects at a much faster rate than a publicly owned company, mostly due to the greater amount of resources at its disposal. However, none of the decisions these companies make are open for public review, and IOUs have no obligation to operate in a transparent manner. And, at the same time, many people may have no choice but to give such companies their business. In addition, IOU costs can be astronomical as compared to other types of utilities.

Electric Cooperatives

Electric cooperatives, or co-ops, are private organizations created by the government to provide service to areas that do not offer enough of a profit to any investor-owned utilities. They are owned by the people whom they serve. These entities were created in the 1930s by President Franklin Delano Roosevelt. More than 900 co-ops operate today, providing power to small communities throughout the U.S., with about 42 million Americans dependent on co-ops to receive their power.

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