Electricity Infrastructure in the United States

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Until a few years ago, private firms and investor-owned utility companies had total control over the electricity market and over setting prices in specific geographical areas (1). These companies were normally vertically integrated; they produced electricity, carried it through transmission lines, and distributed it among customers. Except for the national transmission network that is shared by all utilities, these companies owned or controlled a major portion of generating stations, transmission lines to and from the national grid, and other ancillary services. The role of the government was to oversee their operation to assure the industry’s compliance with environmental and safety regulations and to limit their monopolizing power, thus preventing them from illegal practices such as hoarding and market manipulation.

The task of overseeing US energy industries including interstate commerce, wholesale power transactions, transmission, and infrastructure regulation is assigned to the Federal Energy Regulatory Commission (FERC) (2). The role of local and state authorities has been limited to levying taxes and regulating rates utilities can charge customers while giving the utilities a fair rate-of-return on their investments. Below we discuss the electricity infrastructure in California. Other states have infrastructures that function in similar manners.

In California, electricity infrastructure consists of four principal components: electricity generating facilities, the interstate electricity transmission grid, transmission lines connecting the generating facilities to the grid, and the distribution lines that connect the electricity grid to the end electricity users. Californian receive their electricity service from one of three types of providers (See the text box for definitions of commonly used terms below):

• Investor-owned utilities (IOUs), which provide about 2/3 of retail electricity service. The state’s three largest electricity IOUs are Pacific Gas and Electric, Southern California Edison, and San Diego Gas and Electric. Each IOU has a unique, defined geographic service area. The rates that IOUs can charge their customers are determined by the California Public Utilities Commission (PUC).

• Publicly-owned utilities (POUs), which provide 1/4 of retail electricity service. POUs are governed by a board elected by public or appointed by a local elected body. POUs are not regulated by PUC. Rather, they set their own terms of service. California’s major publicly owned electric utilities include the Los Angeles Department of Water and Power and the Sacramento Municipal Utility District.

• Electric service providers (ESPs), which provide the remaining retail electricity service. These ESPs generally serve large industrial and commercial customers. The ESPs also provide electricity to some state and local government agencies, such as several University of California campuses and some local school districts. Like POUs, ESPs set their own terms of service.


Energy From Renewable Sources

Current law requires IOUs and ESPs to increase the amount of electricity they acquire (from their own sources or purchased from others) that is generated from renewable resources, such as solar and wind power. This requirement is known as the renewable portfolio standard (RPS). Each electricity provider subject to the RPS must increase its share of electricity generated from eligible renewable resources by at least 1 percent each year so that, by the end of 2010, 20 percent of its electricity comes from renewable sources. Current law does not require POUs to meet the same RSP that other electricity providers are required to meet. Rather, each POU set their own renewable energy standards and schedule to meet those standards.


(1) Ibid.

(2) Federal Energy Regulatory Commission, FERC (http://www.ferc.gov).

(3) Toossi Reza, "Energy and the Environment:Sources, technologies, and impacts", Verve Publishers, 2005

Further Reading

Bureau of Naval Personnel, Basic Electricity, Dover Publishing Company.

The Environmental Effects of Electricity Generation, IEEE, 1995.

The Electricity Journal, Direct Science Elsevier Publishing Company, This journal addresses issues related to generating power from natural gas-fired cogeneration and renewable energy plants (wind power, biomass, hydro and solar).

International Journal of Electrical Power and Energy Systems, Direct Science Elsevier Publishing Company.

Home Power Magazine (http://www.homepower.com).

External Links

Federal Energy Regulatory Commission (http://www.ferc.gov).

Energy Information Agency, Department of Energy (http://www.eia.doe.gov/fuelelectric.htm).

California Energy Commission (http://www.energy.ca.gov/electricity).

National Council on Electricity Policy (http://www.ncouncil.org).

Southern California Edison (http://www.sce.com).

Pacific Gas and Electric (http://www.pge.com).