Industry 101 | What is Regulation in the Utility Industry?

Originally Published AUGUST 8, 2017 on Red Clay in part with their Industry 101 Series.
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Regulation in the utility industry refers to the rules created by government or local bodies which the utility companies must adhere to by law.

Electric utilities are regulated by state, federal, and local agencies. These agencies govern the prices they charge, the terms of their service to consumers, their budgets and construction plans, and their programs for energy efficiency and other services.

DEREGULATED MARKET

Regulated markets feature vertically-integrated utilities that own or control the entire flow of electricity from generation to meter. Examples in the U.S. include Florida, Colorado, Idaho, and Kentucky. Conversely, utilities in deregulated markets must divest all ownership in generation and transmission and are only responsible for:

  • Distribution, operations, and maintenance from the interconnection at the grid to the meter
  • Billing the ratepayer
  • Acting as the Provider of Last Resort (POLR)

Deregulated markets feature grid operators that administer wholesale markets to ensure reliability on the grid and prevent blackouts. Multiple retail suppliers – or load serving entities, known as LSEs – buy generation and sell electricity to end users.

To the right is the USA map showing where electricity is regulated and where it is not.


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