SIC 4931

This industry classification consists of companies primarily providing electricity, but also furnishing other utility services. Companies in which the electricity sales account for 95 percent or more of the revenues are listed in SIC 4911: Electric Services.

NAICS Code(s)

221111 (Hydroelectric Power Generation)

221112 (Fossil Fuel Electric Power Generation)

221113 (Nuclear Electric Power Generation)

221119 (Other Electric Power Generation)

221121 (Electric Bulk Power Transmission and Control)

221122 (Electric Power Distribution)

221210 (Natural Gas Distribution)

Background and Development

The roots of the U.S. electric utility industry can be traced back to 1878, when the first private electric company, Edison Electric, began operating in New York City. The first city-owned electric system began operating in Butler, Missouri, in 1881. By 1900, utilities of both types had proliferated; there were more than 800 publicly owned systems and about 2,000 private power companies. Most electric utilities were vertically integrated, controlling generation plants as well as the transmission and distribution lines to customers in multiple states.

Modern state utility regulation was born in Wisconsin in 1907. The Wisconsin Public Utilities Commission charter served as a model for other state efforts. It was the first to require operating permits for all utilities to initiate service, and it was the first to regulate rates of service and to control the issuance of securities by regulated public utilities.

From 1910 through the 1920s, the number of electric utilities declined. Many were controlled by a small number of holding companies, which were, in turn, owned by other holding companies. By 1932, three holding companies controlled 45 percent of all U.S. electricity generation. They charged excessive rates, had high debt-to-equity ratios, engaged in self-dealing, and provided unreliable service. Most highly leveraged holding companies that stayed solvent in the 1920s collapsed after the stock market crash, unable to service their debt.

The 1930s saw federal government involvement in power production in rural areas through the Tennessee Valley Authority, the Rural Electrification Administration, and five federal Power Marketing Administrations formed to sell cheap power to municipal and cooperative systems.

In 1935, Congress passed the Federal Power Act and the Public Utility Holding Company Act. The Federal Power Act created a Federal Power Commission (now the Federal Energy Regulatory Commission) to regulate interstate and wholesale electric power transactions. The Public Utility Holding Company Act required holding companies that own or control more than 10 percent of another utility to provide the Securities and Exchange Commission with detailed financial information.

Between 1935 and 1978, little changed. In 1978, primarily in response to the oil crisis, Congress passed The Public Utility Regulatory Policy Act (PURPA), designed to lessen domestic dependence on foreign oil and encourage alternate energy sources. PURPA required utilities to purchase electricity generated by small independent producers using wind or geothermal energy, or by cogenerators, which simultaneously produce electricity and thermal energy. Congress also passed the Fuel Use Act, which prohibited burning natural gas in new power plants to conserve what was then thought to be a dwindling supply.

The next major change was the Energy Policy Act of 1992, which increased competition in wholesale energy markets, allowing utilities to operate independent generating plants outside service territories and enter into wholesale power agreements. However, authority over retail electric sales—sales of electricity directly to homeowners and businesses—was left to regulatory commissions in each of the 50 states.

In 1996, the Federal Energy Regulatory Commission issued Order 888 and Order 889, two final rules governing access to utility power lines. Order 888 required utilities to offer nondiscriminatory access to their power grid, even to direct competitors. Order 889 required utilities to share information about available transmission capacity through electronic information systems. FERC also announced a new policy to review proposed mergers in 12-15 months.

The industry was in the process of transitioning to a competitive market during the 1990s, and the final outcome of that ongoing national debate was uncertain. Part of the uncertainty stemmed from a bifurcation in regulatory responsibilities between federal and state governments. Federal law regulated the wholesale power market, that is, sales or bulk power between power suppliers or across state lines. State regulators, however, regulated sales of power to retail end-users, such as homes and businesses.

About 30-40 percent of a burned fuel's energy is converted to usable electricity. The remaining thermal energy (the heat produced by the burning fuel) is dissipated into the atmosphere without recapture. Because of the low energy efficiency of electricity-producing plants, research focused on recapturing some of the lost thermal energy. This process, known as "cogeneration," allows plants to produce and market both electricity and the heat that is produced in the process (usually in the form of piped steam heat).

A new wave of large cogeneration projects emerged toward the latter decade and into the millennium, representing viable power sources. Most cogenerated power remains in the manufacturing sector, with the paper and chemical industries as leading users. The potential savings in energy remains tremendous. For example, in 1998 more than 2.66 trillion cubic feet of natural gas, almost 60 million barrels of petroleum, and 56.8 million short tons of coal were all burned off in order to produce electricity.

With the continued deregulation of electricity and rising environmental concerns, the appeal of on-site electric generation continued to grow. The Federal government also had taken a renewed interest in cogenerated power because of the decrease in global carbon emissions. On December 10, 1998, the Department of Energy announced its goal to double the capacity of cogenerated power by 2010. Partially in anticipation of this expected growth, the Comprehensive Electricity Competition Act of 1999 contained provisions addressing required interconnections between cogenerative power producers and distribution utilities.

Current Conditions

In 2002, 3.8 trillion kilowatt hours of electricity were generated for the industrial, commercial, and electric power sectors combined. The average retail cost was 7.21 cents per kilowatt hour. Electricity demand was expected to grow about 2 percent annually into 2025. Prices were expected to decline by about 8 percent from 2004 to 2008.

The trend toward energy efficiency continued in the 2000s. According to the American Council for an Energy Efficient Economy (ACEEE), state funding for energy efficient programs in 2003 was expected to be about 32 percent more than just three years prior.

The electric services industry took a huge hit on August 14, 2003, when the largest blackout in the history of North America occurred along much of the northeastern part of the country, due to a power grid failure. As a consequence, the industry created voluntary reliability standards for power grids. In addition, the focus in the

SIC 4931 Electric and other Services Combined

2000s was on diversification of power sources, including "green" sources.

Industry Leaders

Consolidated Edison Inc. of New York was the industry leader in 2001, with revenue of more than $18.8 billion and 14,300 employees. In New York City alone, Con Edison had 3.1 million customers in 2003, both business and residential. The company posted sales of more than $9.8 billion in 2003.

Newark-based Public Service Enterprise Group Inc. was in second place with 2001 revenue of $17.9 billion and 13,400 employees. Xcel Energy Inc. of Minneapolis was third with $15.0 billion in revenue and 15,800 employees. Other notable companies were Niagra Mohawk Holdings Inc. of Syracuse, with $12.6 million in revenue and 7,600 employees, and Aquila Inc. of Kansas City, Missouri, with $12.0 billion in revenue and 8,200 employees.

Further Reading

Baker, Deborah J., ed. Ward's Business Directory of US Private and Public Companies. Detroit, MI: Thomson Gale, 2003.

Federal Energy Regulatory Commission. "Electric Reliability," 25 February 2004. Available from .

Hoover's Company Fact Sheet. "Consolidated Edison, Inc." 3 March 2004. Available from .

"Supply Vs. Demand." Transmission & Distribution World, 1 July 2003.

U.S. Department of Energy. Annual Energy Outlook 2004 With Projections to 2025. Available from .

——. Monthly Energy Review, February 2004. Available from .

——. "Short Term Energy Outlook," March 2004. Available from .

User Contributions:

Comment about this article, ask questions, or add new information about this topic: