Utilities Sector by Better Trades

Defined as a broad concept that deals with the use and knowledge of tools and crafts, Utilities, when applied, can affect ones’ ability to control and adapt to the surrounding environment. Dating back to the earliest beings, the use of technology began with the adaptation of natural resources that were then turned into simple tools.

Utilities, or public utilities, are companies or corporations that maintain the infrastructure for public services and the general needs of its citizens. The term utility refers to the set of services provided by these organizations, which are in turn, consumed by the general public.

These services include electricity, natural gas, water and sewage utilities, while telephone services are sometimes also included. Utilities are subject to control and regulation ranging from local community-based groups to statewide governments and up the federal level as well. These are put into place to help protect from the formation of monopolies.

Due to the fact that in the past monopolies have arose, utilities have come under intense scrutiny in recent years as proponents are in favor of regulation to include the desire to control market power, promote investment, facilitate competition or system expansion and stabilize markets.

Throughout the U.S., there are sometimes natural monopolies that develop due to the infrastructure that is put into place for producing and delivering a product such as electricity or water, which is extremely expensive to build and maintain. As a result of the high costs to own and operate particular utilities, there are often government monopolies within certain sectors that are most often regulated by a public commission.

Within certain segments of the Utilities industry, there are four distinct areas of operation. The first one, the Multi-line industry, is made up of utilities that primarily produce and distribute electric power and natural gas to customers nationwide. The segment includes 22 utility companies with a market cap nearing $31 billion.

These companies conduct their business with significant operations in multiple utility operations, including electric, natural gas, water and other regulated utility operations. Companies involved in these operations include CenterPoint Energy Inc. (CNP), Dominion Resources Inc. (D), Duke Energy Corp. (DUK), Exelon Corp. (EXC) and National Grid Plc. (NGG).

As for the Electric Utilities industry, it involves 74 companies with a market cap nearing $11 billion, which participate in the generating and distribution of electric power. This segment includes such varying operations as hydroelectric, fossil fuel, nuclear, solar, tidal, wind and independent electric power generators. Taking part in this industry are companies such as Allegheny Energy Inc. (AYE), Calpine Corp. (CPN), Consolidated Edison Inc. (ED), Entergy Corp. (ETR), FirstEnergy Corp. (FE), PPL Corp. (PPL) and Southern Company (SO).

The Natural Gas segment of the Utilities industry contains 33 companies taking part in the production and distribution of natural gas under the watchful eye of governmental regulation. The Natural Gas industry, however, does not include companies that are engaged in liquefied petroleum gas distributed in canisters for home uses or gas stations for automobile use, and gas pipeline operations between producers and distributors. With a market cap of $6.7 billion, the industry is made up of such companies as AGL Resources Inc. (AGL), Enbridge Inc. (ENB), Questar Corp. (STR), Spectra Energy Corp. (SE) and Vectren Corp. (VVC).

The final segment within the Utilities industry is the Water & Others division. This unit pertains to 19 companies all dedicated to the delivery and treatment of water, as well as the regulated supply of steam and cooled air. The industry includes water treatment and filtration plants, sewage disposal plants, geothermal and steam heat suppliers. With the smallest market cap out of all four segments, $6.4 billion, the division includes companies such as Aqua America Inc. (WTR), Veolia Environnement SA (VE), California Water Service Group (CWT), American States Water Co. (AWR) and SJW Corp. (SJW).

Nowadays, utilities can be either publicly owned or privately owned. Public utilities include municipal and cooperative utilities, with municipal utilities including operating territories outside of its perceived city limits. Co-op utilities are companies that are owned by the customers that they serve and are usually found in rural areas throughout the U.S. Private utilities, on the other hand, which are considered to be investor owned utilities are most often listed on major stock exchanges.

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