Electric Power Generation & Distribution
Industry Profile Report
Dive Deep into the industry with a 25+ page industry report (pdf format) including the following chapters
Industry Overview Current Conditions, Industry Structure, How Firms Operate, Industry Trends, Credit Underwriting & Risks, and Industry Forecast.
Call Preparation Call Prep Questions, Industry Terms, and Weblinks.
Financial Insights Working Capital, Capital Financing, Business Valuation, and Financial Benchmarks.
Industry Profile Excerpts
Industry Overview
The 2,227 electric power generation and distribution companies in the US produce and deliver electricity to residential customers, commercial businesses, and industrial operations. The industry consists of publicly-owned utilities, electric co-operatives, investor-owned utilities, and power marketers. Operations are either fully or partially regulated, depending on the State they operate in.
Changes in Environmental Laws and Regulations
Environmental laws and regulations are changing constantly and can have large impacts on electric utilities.
Shift to Natural Gas Generation
Low natural gas prices and restrictions on coal and nuclear plants are causing a shift to natural gas for new generating capacity.
Industry size & Structure
A typical electric power company operates from multiple locations and has revenues of about $253 million per year.
- There are 2,227 firms providing electric power utility services in the US, employing 500,000 workers, and generating annual revenue of $563 billion.
- 59% are publicly owned utilities, 25.2% are cooperatives, 5.2% are investor-owned utilities and 9.3% are power marketers.
- Public utilities serve 14.5% of US customers, cooperatives serve 13.2%, investor-owned utilities serve 67% and non-utilities and power marketers serve 4.8%.
- 45% of establishments have fewer than 20 employees, and 20% of firms are large with over 100 employees each.
- Large electric power utilities include: Exelon Corp., Southern Co., First Energy, Puerto Rico Electric Power Authority (PREPA), PSEG Long Island, Los Angeles Department of Water and Power (LADWP), Withlacoochee River Electric Cooperative, Cobb Electric Member Corporation and Middle Tennessee EMC.
- Entry into the business as a for-profit enterprise in the distribution business is difficult as most population centers are in franchised territories as designated by the state public utility commission. Entry into the generating business as an independent power producer (IPP) has a lower barrier, requiring only permits and capital for construction and certification by the ISO.
Industry Forecast
Electric Power Generation & Distribution Industry Growth
Recent Developments
Jul 23, 2024 - Strong Electrical Power Spending Growth
- Steady government investments in infrastructure, and building and transportation electrification are expected to drive robust growth in electric power project construction spending in 2024 and beyond, according to construction consultancy and investment banking firm FMI. Grids expect strong electricity load growth in the coming years amid increased investments in manufacturing, data centers, and the electrification of transportation and buildings. Power project spending is forecast to rise 8% in 2024 over 2023 levels and grow another 8% in 2025 before moderating to 6% annual growth through 2028.
- US electricity demand declined 1.6% in 2023, partly due to mild weather, but electricity consumption is expected to rebound to 2.5% growth in 2024, according to a recent report by the International Energy Agency (IEA). US electricity consumption is projected to grow by an average of 1% annually in 2025 and 2026 amid continued electrification efforts and robust electricity demand from data centers. Between 2024 and 2026, data centers are expected to account for one-third of new US electricity demand.
- In May, amid rising demand for electricity, the Federal Energy Regulatory Commission (FERC) approved two new rules aimed at streamlining the process of building the large transmission lines needed to bring more power to the US grid, according to The Wall Street Journal. The first rule will require power producers and transmitters to apply a 20-year scope in their forecasts for electricity supply and demand shifts. The planning rule also urges utilities to implement grid-enhancement technologies, including power flow control devices and sensors, which can make transmission on existing lines more efficient. The second rule deals with permitting changes for new transmission lines to clear bottlenecks that have kept new renewable energy sources from hooking up to the grid. In 2023, the backlog of new power projects waiting to connect to the grid – mainly wind, solar, and battery storage – grew by 30% compared to 2022, according to Lawrence Berkeley National Laboratory. The new transmission line rule favors projects that benefit electricity consumers and adjusts cost allocation for projects spanning multiple states.
- Booming demand for artificial intelligence (AI) has unleashed a race to build enough data centers to support the nascent technology, according to The Wall Street Journal. However, building and outfitting the giant warehouses that shelter AI supercomputers is being slowed by land, power, and components shortages. Developers have been challenged to find available tracts of cheap property near enough to large amounts of electricity supply. The lead times for some key data center components, including cooling systems and backup generators, have grown up to five times longer than just a few years ago. According to real estate firm CBRE, US data center space increased by 26% in 2023. However, prices for available data center space are rising while vacancy rates are essentially nil, suggesting demand is far outstripping supply. Data center services firm Equinix notes it is challenging for the industry to scale up quickly due to extensive project planning and supply chain management complexities.
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