The electric power industry can be divided into two main categories: traditional electric utilities,and nonutility power producers. There are 3,195 utilities and 1,994 nonutilities. Traditional electric utilities include investor owned utilities, publicly owned utilities, cooperatives, and Federal utilities. Nonutility power producers include facilities that qualify under the Public Utility Regulatory Policies Act of 1978 (PURPA), cogeneration facilities, independent power producers (IPPs), and exempt wholesale generators under the Energy Policy Act of 1992 (EPACT). Those facilities that qualify under PURPA are able to sell the electricity they produce on the wholesale energy market. Cogeneration facilities are businesses that produce electricity incidentally to their primary product and can be divided into two groups, topping-cycle and bottoming-cycle systems. In a topping-cycle system a boiler is used to produce steam to turn a turbine and the waste heat is then used for some industrial purpose. In a bottoming-cycle system high temperature air produced for an industrial purpose such as a glass kiln or aluminum furnace is used secondarily to produce steam and turn a turbine for electric production. Much of the electricity produced by cogenerations is for their own use, but excess power is sold to the local utility. In order for a nonutility to qualify under PURPA there are criteria regarding ownership, operation and efficiency that must be met. Independent power producers must also meet similar criteria. Independent power producers must use renewable energy sources, do not possess transmission facilities or sell electricity on the retail market. All of their sales of power are on the wholesale market. Exempt Wholesale Generators (EWGs) were formed under EPACT which exempted them from meeting the criteria of PUHCA for corporate structure and geographic location. They are allowed to build and operate power projects anywhere.

The system of electric supply that has developed in the United States is centered on traditional utilities which are given monopolistic franchises based upon geographical area to which they then supply electricity at prices controlled by governmental agencies. Customers are classified for the purposes of planning, determining rate schedules, and sales based upon demand level as residential, commercial, industrial and other sectors. The residential sector includes homes, apartment buildings and condominiums. The commercial sector includes nonmanufacturing businesses such as hotels and motels, restaurants, wholesale businesses, retail stores and health, social and educational institutions. The industrial sector includes manufacturing, mining, forest products, agricultural and fishing processors and construction. The other sector includes public street lighting, railroads, divisions of State and Federal Governments with special contracts, and municipalities. Rates vary depending upon the total annual usage of the end use sector and the pattern of their use. Within each sector there are several alternative rate schedules Residential users pay more than industrial users because it costs the utility more to provide them with service versus the customers usage, and certain industrial customers pay less than others because their usage falls at off peak times for the utility.

Traditional utilities can be divided into various classes based upon ownership. Investor-owned electric utilities, publicly owned electric utilities, cooperative electric utilities and Federal electric utilities. Investor-owned are privately owned by their stock holders and make up 75% of electric generating capacity, sales and revenue in the United States. There are 243 of them. Profits are distributed to stock holders as dividends or reinvested in the company. They are granted geographically based franchises and are obliged to serve all customers within their service area, to charge reasonable rates, to offer service to comparable customers for comparable prices and under comparable conditions. Most provide generation, transmission and distribution services and they operate in all States except Nebraska. Publicly owned utilities are nonprofit governmental agencies established for the purpose of providing electric service to their communities at cost. Most do not generate the power that they sell; they buy it from other producers on the wholesale market, although some do. 62% of electric utilities in the United States are publicly owned, 2,010, and they generate 10% of all power and account for 15% of retail sales. Publicly owned utilities are concentrated in Nebraska, Oregon, Arizona and California. They can be divided into municipals, public power districts (PUDs), State authorities and irrigation districts. State authorities such as the Power Authority of the State of New York and the South Carolina Public Service Authority are agencies of the State government . Irrigation districts such as the Salt River Project in Arizona are run by boards of directors. Cooperative electric utilities are owned by their members and provide electricity to those members. They operate mainly in rural areas with low densities since these areas have historically been seen as uneconomic for investor-owned utilities. There are 932 cooperatives in 47 States and they represent 29% of utilities in the US with 8% of the sales and 4% of the generation. Co-ops are incorporated under State law and run by boards of directors which are elected. The 10 Federal utilities are operated by the U.S. Army Corps of Engineers, the U.S. Bureau of Reclamation and the Tennessee Valley Authority. The TVA is the largest utility in the U.S.. It generates, distributes and markets its own electricity. The power generated by the other two agencies is marketed by the Federal power marketing administrations: Bonneville, Southeastern, Southwestern and Western Areas. Together, they represent less than 1% of electric utilities and 10% of generating capacity. Federal power produced at one of the 180 power plants operated by the agencies is sold at cost. Many of the plants are hydropower plants such as the largest power plant of any kind in the U.S., Grand Coulee Dam.

Because electricity cannot be stored, it must be continually generated as it is used. This translates into a fairly steady demand for a basic quantity of electricity at all times, which is referred to as base load. A utility generates or purchases this amount of electricity day in and day out, 365 days a year. This electricity is from the most efficient, economical source the utility has available to it, which depends upon what is available to them locally or regionally. The base load is a constant, however electricity usage varies on a seasonal and even a hourly basis in a reasonably predictable manor, therefore the utility must have flexibility enough to meet the larger demand that occurs. This increase in demand is known as peak load and intermediate load. Generating the power for these temporary increases in demand does not require the same level of efficiency and is often done with somewhat less economical sources of electricity. For example, a utility in an area of abundant hydropower may use that for base load and have a natural gas fired plant to fill peak load needs. Intermediate load is greater than base load but less than peak load, a transitional period whose needs are met with intermediate load generating units. Most utilities also have reserve or standby generating capacity for use if demand exceeds supply for a short period. Traditionally summer is the highest use period, and generation efficiency drops some what in warm weather, so additional sources of electric generation are necessary for meeting the increased demand. When demand for electricity exceeds supply, as for instance a prolonged summer heat wave, brown outs occur. Lights dim, motors turn slower, and people are asked to conserve energy.

If a utility has excess capacity it can sell this extra supply of electricity to another utility in the region via interconnections, on high voltage power lines known as AC or DC lines. There are three interconnected networks in the U.S., the Eastern, the Western and the Texas Interconnected Systems. The individual utilities are controlled from dispatch centers who adjust the production and flow of power to meet the needs of the utilities customers. When necessary to meet need, the dispatch center will purchase power on the wholesale market to meet demand within it’s system. This power is purchased from the U.S. bulk power system, made up of the three interconnected networks. The utilities within each power grid coordinate their operations and buy and sell power among themselves. These interconnected networks include all of Canada and much of Mexico and power is imported via these connections. Planning and coordination of the three networks is the responsibility of the National Electric Reliability Council (NERC), an organization formed in 1968 by the electric industry in response to the 1965 blackout on the East coast. NERC covers the 48 contiguous states, Canada and Mexico with nine regional councils. It is responsible for assuring adequate power is available within its service areas and coordinates the bulk market.

Electricity is measured in units called watts which equal “the rate of energy transfer of 1 ampere flowing at a pressure of 1 volt at unity power factor” and in watt hours which are equal to 1 watt of power supplied to or taken from, an electric current steadily for 1 hour”. Individual customers are billed for kilowatt hours used (1000’s of watt hours) which are measured by watt-hour meters. Utilities generate power by the megawatt, or million watts. Each power generating facility has a rating which is the amount of electricity it is able to produce. The nameplate capacity is the level at which it can generate electricity on a continuous basis, running at peak performance. This is not the same as the net capability, which is the continuous hourly output the unit provides to the grid as demonstrated by tests. It’s very similar to gas mileage figures for a car, it may be capable of getting 50 mpg, but your mileage will vary depending upon what kind of driving you do and how well you maintain your car.

Electricity is produced by generators powered in a variety of ways, steam turbines are the most common. In a steam turbine heat is used to turn water to steam which then turns the blades of the turbine, which drives a shaft and turns the generator. It makes no difference where the heat comes from, the principle is the same. Coal, oil, natural gas, biomass, nuclear all are used in steam turbines. Some other sources of electricity also use turbines, such as hydropower where the turbine is turned by the kinetic energy of water. These types of power generation are often used to meet base load demand. Steam turbine plants are most efficient when operated continuously since they do not produce power until the water is hot enough to boil. For immediately available peak load, utilities use gas turbine units, internal combustion engines and hydroelectric units which can respond quickly to changing demand. Gas turbines operate by passing the hot gasses produced from combustion of natural gas or oil directly through a turbine. These units are generally 100 mw or less and are less efficient than steam turbine units. Internal combustion engine such as diesel generators are portable and instantaneous sources of electricity used for emergencies, and reserve. They are 5 mw or less in size. Each of these methods of electric generation is what is referred to as a prime mover: steam turbines, gas combustion turbines, water turbines, wind turbines and internal combustion engines. Some generating units can utilize more than one type of fuel, for example coal or natural gas, these are known as duel-fired units and may be either sequentially fired or concurrently fired. Sequential plants use one fuel then the other, concurrent plants can use two fuels at the same time.

Hydroelectric power generation is flexible, instantaneous, and efficient. It represents about 14% of power produced in the U.S. There are three basic types, falling water, run of the river, and pumped storage systems. The traditional dam with a reservoir behind it is the falling water type, where water falls through conduits referred to as penstocks and turns turbines which are connected to generators. 70% of hydroelectric generation is in the Pacific Northwest and Rocky Mountain States. The run of the river type is based upon the force of the rivers current turning turbines and has no reservoir. This makes run of the river generating plants dependent upon seasonal changes in river flow. Pumped storage takes advantage of off peak periods to pump water up into a reservoir with electric pumps. Then, when additional power is needed, it can be released to turn turbines and produce power. Falling water type hydropower plants are the most common and vary in size up to 12,000 mw. The largest power plant in the United States is the Grand Coulee Dam at 6,494 mw.

Hydropower has been used in the U.S. since 1882, when the first hydroelectric plant was built in Appleton, Wisconsin to produce 12.5kw. U.S. hydropower capacity is 92,000mw and supplies 28 million households. The amount of power a dam can produce is determined by the volume of water flow and the height the water falls from the water surface of the reservoir to the turbines, referred to as head. More flow and head produces more electricity. Most hydropower plants are multipurpose providing flood control, irrigation, recreation and drinking water as well as, or instead of electricity. Roughly 2,400 of the 80,000 dams in the U.S. are currently producing electricity, however, others could be retrofitted for power production. Hydroelectric power averages $0.051-$0.113/kWh.

Steam turbine plants can be divided into three general categories, Fossil Fueled, Nuclear, and Renewable. Most of the electricity produced in the United States comes from fossil fueled steam turbine plants, about 70%. The dominant fossil fuels are coal, petroleum and natural gas; others include petroleum coke, coke oven gas, and liquefied petroleum gas among others. Steam turbine plants operate by burning fuel which heats water in a boiler; the water boils and produces steam, which is channeled to a turbine and turns it; the turbine is connected to a generator shaft which turns and produces power. All steam turbine plants function the same way.

Of the many fuels used in steam turbine plants, coal is the most common. More electricity is generated from coal in the United States than from all other sources combined, 56.5%. Coal is inexpensive and readily available since the US has large deposits. In 1996 electric utilities purchased 863 million short tons of coal for electric generation. This was a record figure, indicating that coal fired plant operation is increasing rather than declining. Coal fired plants produced 1,737 billion kilowatt hours of electrical power in 1996. At least partially, this was due to increased demand for electrical power as well as low coal prices at $1.29 per million Btu as a result of increased coal production. Prices of coal have been declining for the last decade or so and in 1996 reached $26.33 per short ton, down $1.13 from the year before. The Clean Air Act Amendments of 1990 has required that lower sulfur coal from the Western United States be used in greater amounts to reduce emissions of sulfur dioxide from coal fired plants which produces acid rain.

After coal, natural gas and fuel oil are the second and third most used fuels for steam turbine plants respectively. 2,605 billion cubic feet of natural gas and 107 million barrels of petroleum were purchased by electric utilities in 1996. Gas use accounted for 13% of fossil fuel use and oil accounted for 3%. This represented a substantial decrease in gas use over the previous year due in part to increases in gas prices from $1.98 per million Btu in 1995 to $2.64 per million Btu in 1996. Use of petroleum by electric utilities is concentrated in Connecticut, Massachusetts, New York, Florida, and Hawaii which accounted for 76% of all oil use for power production in the U.S. The average cost of petroleum was $3.16 per million Btu in 1996 compared to $2.68 per million Btu in 1995. The vast majority, 93%, of petroleum used for electric generation is number 6 fuel oil.

After the oil embargo of the 1970’s by the Organization of Petroleum Exporting Countries and the nationalization of oil in Iran following the revolution there in 1979, dependence upon oil as a fuel for electric generation has declined and no large oil burning plants have been built. Many utilities converted plants to coal or switched dual fired plants to natural gas. Use of natural gas by electric utilities has historically taken second place to home use of natural gas for heating and cooking under State and Federal regulatory systems, often being denied natural gas in the 1970’s when supplies were insufficient for both use sectors. With the passage of the Natural Gas Policy Act of 1978 and the exemptions provided by the Power plant and Industrial Fuel Use Act of 1978, restrictions upon utility use of natural gas for electrical generation were eased and more utilities used it, particularly in the areas where gas is produced.

In a gas turbine or combustion turbine unit hot gases produced by burning natural gas and distillate oil in a high pressure combustion chamber are passed directly through a turbine, which is connected to a generator shaft and turns the generator, producing electricity. The principle is similar to a jet engine. Often used for peak, emergency and reserve power production because of their quick startup time, gas turbines are less efficient than steam turbine plants. Generally 100mw or smaller, gas turbines can be installed in a wide range of locations. Not normally used for base load requirements, hybrid plants can be constructed that utilize both gas and steam turbines and are more efficient than gas turbines alone. Known as combined cycle operation, the hot combustion gases turn a turbine as in a standard gas turbine then are sent to a steam boiler where the waste heat is used to produce steam to drive a second turbine. Gas turbines accounted for 34,814mw in 1996, and petroleum fired turbines accounted for 28,273mw, for a combined total of 63,087mw. There were 1,549 gas turbine plants as of January 1, 1998.