Electric Energy Distribution

The US electric power transmission and distribution (electric energy distribution) industry includes about 1,200 companies with combined annual revenue of about $260 billion. Major companies include American Electric Power, Exelon, FPL Group, Pacific Gas & Electric, and Southern Company. The industry is highly concentrated: the 50 largest companies account for more than 80 percent of revenue.

The electric energy distribution industry includes companies that own and operate high-voltage transmission lines and retail distribution systems, as well as intermediaries like energy dealers and brokers. Electric power generation companies are covered in a separate industry profile.

COMPETITIVE LANDSCAPE

Demand for electricity is driven by industrial and commercial activity and by population growth. The profitability of individual companies depends on the efficiency of their operations. Large companies have economies of scale in purchasing power; small companies can compete effectively by specializing in geographic regions. The industry is capital-intensive: average annual revenue per worker is about $2 million.

The traditional electricity industry consisted of investor-owned utilities, municipal utilities, cooperatives, and government entities that owned the generation, transmission, and retail distribution facilities within a limited area and served all customers within that area as tightly regulated "natural monopolies." Though "natural monopolies" still exist, the electric energy industry in the US underwent a restructuring driven by changes in federal and state laws in the 1990s. In restructured, or deregulated, markets, generation, transmission, and distribution operations are carried out by separate ...