What is an Electric or Natural Gas Utility?

Updated on 30/11/2020

min reading

Your local utility is your historic provider of natural gas and/or electricity. This means that they automatically deliver and supply your energy. We detail how utility service works in the United States, and how to switch to an alternate supplier.

What is a Local Utility?

Generally utilities exist in the following sectors of the market: electricity, natural gas, water, sewage, and sometimes telephone service. In many markets, a public utility company still owns and maintains the infrastructure; in liberalized markets, energy may be purchased from private suppliers, even if it is still distributed through utility-owned transmission lines or pipes. Sometimes a private company might own electricity or gas infrastructure. In these cases, private utilities are regulated by a state's Public Utilities Commission, or PUC. In rural areas, it might be common to find a cooperative utility, which is owned by its customers.

Can I Choose My Energy Utility?

You cannot choose your utility, but you can choose your energy supplier in states with liberalized energy markets.

Why do Utilities Exist?

Generally utilities exist in the following sectors of the market: electricity, natural gas, water, sewage, and sometimes telephone service. Why? Because infrastructure for these things is prohibitively expensive, and monopolistic by nature. Imagine five different sets of power lines running down your street--separate grids for each company that generates, distributes, and sells power. That wouldn't make much sense, would it? In fact, it would be incredibly expensive, and incredibly inefficient.

The most expensive part of energy is delivery, and this is why utilities have maintained their control of delivery across the United States. Necessary investments have already been made.

How do they Work?

Public Versus Privately-Owned Utilities

Even if utilities are privately-owned, states will normally have a hybrid system where the government still regulates prices and utility activity. For example, the California Public Utilities Commission regulates private utility activity with things like pollution limits and requirements, and energy rates.

Utilities buy and sell electricity at the wholesale level through a network of Regional Transmission Organizations and Independent Service Operators (don't worry--even eperts would be hard pressed to come up with an actual difference between these two. It's mainly just semantic) within one of three grids 1) the eastern grid, 2) Texas, which is a single ISO, and 3) the western grid. You might encounter any of the following acronyms referring to utilities:

Electric and Natural Gas Utility Service

In states with liberalized markets, electric and gas utilties continue to exist alongside competition (for more information, see our page on deregulation). This means that there could very well be differences in price between what the utility will harge you for your electric and gas rates, and what a competitor would charge. Which is where we come in, because our specialty is finding lower rates for you, and helping you choose or switch energy providers.

Power Plants: Who Owns Them?

In both regulated and deregulated markets, power plants can be owned by either public utilities or private enterprise. Electricity is purchased on wholesale markets, and then distributed to consumers through the grid. For more information, see our article on wholesale markets.

Signing up for service differs by state. But don't worry, we are here to help! Check out our handy how-to guides, or give us a call at 1 (832) 460-0233! We're friendly, promise.

Choosing Your Service Provider

Choosing your energy provider is important! Companies not only offer different prices, but different types of plans and features, and of course, some are more reputable and have better customer service than others. Navigate all of that choice with our help by visiting our provider page and read our reviews.