seum:
Hall of Electrical History Foundation
4
The Early Years
The Early Years 5
Industry Formation
Industry Formation
1890sElectric utilities began to develop primarily in
urban areas because of economies of scale
Industry had characteristics of a natural monopoly A natural monopoly is where, for technical and social
reasons, it is most efficient to have only one provider of a
good or service Provided service regarded as vital to economic and
social fabric of community (i.e., a public utility) Operated through large, integrated networks Highly capital-intensive
1907State regulation of electric utilities began in
New York and Wisconsin
Regulation spreads to two-thirds of states by 1920
5 6
Industry Formation
Industry Formation By 1920sMost urban areas
are electrified Exclusive utility franchises
(monopoly rights) also came
with an obligation to serve
all customers in the defined
regions Limited federal regulation
of multi-state utilities
Times Square, New York, 1920s
6
© Corbis 7
Holding Companies
Holding Companies 1920sMany small utilities were consolidated and became parts of
larger holding companies
Holding companies own other holding companies and operating
companies. This is a common corporate structure in many industries.
The rapid growth, consolidation, and complexity of the utility industry
outpaced the ability of many local regulators at the time. 1929Stock market crash revealed that many holding companies
were over-leveraged
As a result, federal and state governments strengthened utility
regulation.
7 8
8 The Federal Power Act Interstate sales of
electricity Primarily regulates
shareholder-owned
utilities
FDR signs legislation
© Corbis
1935: Congress passed federal legislation
addressing interstate utility operations
Federal Regulation
Federal Regulation
The Public Utility
Holding Company
Act (PUHCA)
Corporate structure of
utilities 9
Federal Regulation
Federal Regulation Federal and state regulatory scrutiny has grown
significantly since 1935 The federal government regulates interstate power
sales and services; mergers; corporate structure State governments regulate retail electric service;
mergers; facility planning and siting Other federal and state laws, rules, and regulations
also apply to the electric utility industry, including,
but not limited to: Anti-trust laws / Dept. of Justice / FTC SEC requirements, including Sarbanes-Oxley Environmental regulations/EPA
9 10
America Electrifies 1930-1970
America Electrifies 1930-1970 Electricity finds many new applications in homes and
businesses New power plants are built to meet customer needs Because of economies of scale, electricity prices
actually go down as larger and more efficient power
plants come on line Transmission lines begin to connect utilities to one
another What we refer to today as "the grid" begins to take
shape
10 11
To encourage competition,
Congress re-examined rate
regulation model of natural
monopolies, including:
Railroad, natural gas, trucking,
airline, and telecom industries
11
© Corbis
1970s: Rate Regulation Re-examined
1970s: Rate Regulation Re-examined Public Utility Regulatory
Policies Act of 1978 (PURPA) Requires utilities to purchase
electricity produced by
cogenerators and small power
producers Federal government expands
regulatory role in state rate policies
1979Motorists line up for first day
of gas rationing 12
Energy Policy Act of 1992
Energy Policy Act of 1992 Creates new class of exempt wholesale generators to sell
power in competitive wholesale markets Expands FERCs authority to order transmission-owning
utilities to provide transmission access to other wholesale
market players Increases energy efficiency standards for buildings,
appliances, and federal government Encourages development of alternative fuels and renewable
energy Expands clean coal programs Reforms and streamlines nuclear plant licensing
12 13
1990s: Some States Move to Retail Choice
1990s: Some States Move to Retail Choice
During the 1990s, a
number of states
adopted different
models to encourage
competition among
generators to serve
retail customers
13 14
Energy Policy Act of 2005 Electricity Initiatives
Energy Policy Act of 2005 Electricity Initiatives Requires mandatory reliability standards Promotes transmission investment and facilitates
transmission siting Repeals PUHCA and reforms PURPA Promotes fuel diversity Increases energy efficiency Gives FERC stronger consumer protection, anti-market
manipulation authority
14 15
How Does the System Work?
15 16
16
Electricity: Its All About Conversions
Electricity: Its All About Conversions
Energy can neither be created nor destroyed - it can only be
transformed (converted) from one form to another
Our lives are surrounded by energy conversion technologies:
Chemical to thermal
Home furnace using fuel oil, natural gas or wood
Chemical to thermal to mechanical
Automobile engine
Chemical to electrical
Fuel cell
Electrical to mechanical
Electric motor
Electrical to radiant
Toaster, light bulb
Power plants are simply energy conversion facilities
converting fuel and energy sources into electricity 17
Mega What?
Mega What? Watt (W)The basic unit of measure of electric power. The power dissipated by a
current of 1 ampere flowing across a resistance of 1 ohm. Kilowatt (kW)A unit of power equal to 1,000 watts. Kilowatt Hour (kWh)A unit by which residential and most business customers are
billed for monthly electric use. It represents the use of one kilowatt of electricity for
one hour.
A 100 watt light bulb burning for 10 hours would use 1 kilowatt-hour of electricity. Megawatt (MW)A unit of power equal to one million watts. Megawatt Hour (MWh)The use of 1 million watts (or 1,000 kilowatts) of electricity
for one hour. This term is used most often for large-scale industrial facilities and large
population centers.
The average U.S. household uses 11.3 MWh (11,327 kWh) of electricity every
year. Power (measured in Watts) equals its current (measured in Amps) times its voltage
(measured in Volts) or Volts X Amps = Watts.
17 18
How Does the System Work?
How Does the System Work?
Electricity, where it comes from and how it gets to me
18
1. Electricity is generated
and leaves the power
plant
2. Its voltage is increased
at a step-up substation
3. The energy travels along
a transmission line to
the area where the power
is needed
4. Once there, the voltage
is decreased or
stepped-down, at
another substation
5. A distribution power line
carries the electricity
6. Electricity reaches your
home or business 19
Generation
Generation
19
Generating
Power and
Getting It to the
Consumer 20
Transmission
Transmission
Thick wires on tall towers
carry high-voltage electricity
from power plants to local
communities and connect
one region to another
20 21
Thinner wires on smaller
towers (or in some cases
underground) carry much
lower voltage power to
homes and businesses
21
Distribution
Distribution 22
Sounds Simple, Whats the Catch?
Sounds Simple, Whats the Catch? Electricity cannot be stored, so supply (generation) must
be produced exactly when needed to meet customer
demand and to avoid system failure Level in lake must
be kept constant at
all times
Laws of physics
dictate that power
flows on path of
least resistance, not
necessarily where
wed like it to
22
Individual Lake Model 23
Sounds Simple, Whats the Catch?
Sounds Simple, Whats the Catch?
23
Lakes
Network
Model 24
Industry Overview
21
24 25
25 Shareholder-Owned Utilities Cooperatively Owned Utilities Government-Owned Utilities Federally Owned Utilities State-Owned Municipally Owned Political Subdivisions
Different Types of Ownership-Structure
Different Types of Ownership-Structure 26
Percentage of Customers Served
By Each Type of Provider
Percentage of Customers Served
By Each Type of Provider
26
Source: Edison Electric Institute
Business Information Group 27
Size and Footprint of the Shareholder-Owned
Electric Industry
Size and Footprint of the Shareholder-Owned
Electric Industry Capital Invested = $533.6 Billion
(as of December 31, 2005) 300,000 Operations
Employees
(2001 total)
Percentage of
Ultimate Customers Served
27
Source: Edison Electric Institute
Business Information Group 28
The Industrys Record
25
28 29
29
1985
represents the
base year.
Graph depicts
increases or
decreases
from the base
year.
Electricity & GDP
Electricity & GDP 30
Increasingly Clean
Increasingly Clean
1980
represents the
base year.
Graph depicts
increases or
decreases
from the base
year.
30 31
Fuel Sources for Electricity Generation
Following section would incorporate Tims
graphics that come from the Fuel Diversity pie
chart that appears on sl