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
                                Source: Vertical IQ and Inforum

                                Recent Developments

                                May 22, 2024 - New Regulations Aim to Speed Connections to the Grid
                                • 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.
                                • In late April, the Biden administration announced new EPA rules that impose stricter controls on carbon emissions for existing coal-fired power plants and new natural gas plants, according to The Wall Street Journal. The new EPA ruling doesn’t apply to existing natural gas plants. Power plants account for about 25% of total US carbon emissions, and the EPA says the new rules will eliminate about 1.4 billion metric tons of carbon dioxide emissions. To comply with the new ruling, affected power plants that plan to operate past 2039 will be required to install carbon-capture technology before 2032. Some industry observers suggest that the costs of adding largely unproven utility-scale carbon capture to the aging coal-fired fleet, combined with regular maintenance costs, will lead to the effective phase-out of coal. The new ruling is expected to face significant court challenges.
                                • Grids expect strong electricity load growth in the coming years amid increased investments in manufacturing, data centers, and the electrification of transportation and buildings, according to construction consultancy and investment banking firm FMI’s second Quarter 2024 North American Engineering and Construction Industry Overview. Load growth is expected to see an average annual rise of 5% after remaining closer to 0% over the past decade. Total US spending for power projects is forecast to increase by 9% in 2024, according to FMI. Power spending growth will slow to 4% in 2025, 4% in 2026, 3% in 2027, and 3% in 2028.
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