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Water is a unique utility in the cyclical lifecycle the resource goes through. This cyclical lifecycle means separate utilities handle the delivery of clean water and the disposal of waste water.

Either public entities or private companies can own, finance, operate, and maintain utilities in charge of public water supply and sanitation systems. In some cases, both a public entity and a private company will share these responsibilities in a public-private partnership. Utilities may be in charge of only water supply and/or sanitation, or they may provide additional services, usuallySimplified Urban Water Cycle electricity and gas. Utilities in the latter circumstance are called multi-utilities. Bulk water suppliers manage large aqueducts and sell treated or untreated water to users, including utilities.


The main federal regulation of the water market deals with the quality of water received and is tightly regulated through the Environmental Protection Agency (EPA). Not only does the EPA handle the delivery quality of water to the public through drinking water laws, but it also supports municipalities in wastewater treatment plants and pollution prevention.

The main piece of legislation the EPA enforces when it comes to drinking water quality is the Safe Drinking Water Act (SDWA). These standards apply differently based on the type of Public Water System (PWS) as defined by the EPA. These laws establish acceptable and safe levels of contaminants within drinking water.

Outside of quality control, regulation of water exists on the state commission level (public utilities commission) where local government ensures accessibility by helping to define acceptable rates for customer billing.

Though entities in the water market might handle both the supply and disposal aspects of the utility, both are separate processes that share some similarity. The water market is not as deregulated as the gas and electric markets are. As a result, one body tends to govern the entire process of water supply or water disposal.


Due to the more regulated nature of the water industry, market roles are not as emphasized or prevalent as for gas or electric utilities and do not fall into the traditional utility marketing model. Instead, the water market Community Water System Ownership(either separate or bundled services of water supply and wastewater disposal) tends to be distinguished through different ownership types. These types of service providers include private service providers, public water systems, and multi-utilities; each can own, finance, operate, and maintain water supply and sanitation in an independent or joint venture relationship.

  • Private Service Providers are owned by private investors and stock is not publicly traded.
  • Public Water Systems (Municipalities) are owned and operated by a municipal government.
    • Community Water Systems (CWS) supply water to the same population year-round.
    • Non-Transient Non-Community Water Systems (NTNCWS) supply water to at least 25 of the same locations at least six months per year (schools, factories, office buildings, and hospitals).
    • Transient Non-Community Water Systems (TNCWS) supply water in places people do not remain for long periods of time (gas stations or campgrounds)
  • Multi-utilities are ownerships that bundle water utilities with more profitable utility markets like electric or gas.

Recent trends have shown a decrease in interest for privatization of water in favor of re-municipalized services.

In addition, most distribution networks are city-owned and maintained with the exception of enterprise privatized networks. Privatized networks generally pay for the privilege to use publically-owned and maintained networks.


Water supply can be broken down into three main aspects:  delivery of water from a source, treatment of source water, and/or the delivery of portable water to consumers. SOURCE WATEREstimated Uses of Water 2010

Source water for human consumption and use is primarily classified as either surface water or ground water. Surface water includes streams, rivers, and lakes. Ground water includes water derived from aquifers or wells. Identified source water areas are protected by federal government regulations through the Environmental Protection Agency (EPA) and state regulations. WATER PURIFICATION

Water withdrawn from sources must be purified before human consumption. Below are the generalized steps for water purification:

Step Process


Chemical process of mixing coagulants to the water to change anions to neutrally charged bodies
Flocculation Neutral particles clump together to form floc
Sedimentation Mixing stops to allow floc to settle and clear water is collected from the top
Filtration Water is moved through a deep filtration bed to remove small particles
Disinfection, Primary


Treatment with ozone or chlorine dioxide in order to remove viruses, bacteria, and other pathogenic organisms
Disinfection, Secondary Chloramines are added as a preventive measure to inhibit contamination during distribution
Corrosion Control pH adjustment is preformed to prevent corrosion of distribution pipes

Once purified, water must meet the standards for contaminant levels required by the National Primary Drinking Water Regulations (NPDWRs)


Wastewater generated after consumption requires treatment before it can be introduced back to the environment. Water treatment is tightly regulated through the EPA and is handled through more than 16,000 publicly-owned wastewater treatment plants. WASTEWATER CLASSIFICATION

Wastewater created can be classified according to the degree of impurity and amount of processing the water must undergo in order to be considered safely converted. Depending on the state of the wastewater prior to treatment and the final quality of the wastewater, the treated water may be eligible for being returned to the water cycle or reused.

Domestic (Sanitary) Sewage is wastewater from residencies or institutes disposing of body waste.

Gray Water is domestic or industrial wastewater from sinks, bathtubs, and washing machines.

Industrial Sewage is wastewater produced form the manufacturing of goods.

Surface Runoff is wastewater from precipitation creating storm overflows. WASTEWATER TREATMENT

Wastewater collected undergoes treatment in wastewater treatment plants. Below are the generalized steps for wastewater treatment:

Step Process
Phase Separation


Sedimentation Removal of solids and non-polar liquids
Filtration Removal of colloidal suspensions of fine solids
Oxidation Biochemical Oxidation Removal of organic compounds
Chemical Oxidation Removal of persistent organic compounds and kills bacterial and pathogens
Polishing Chemical reduction or pH adjustments and removal of contaminants with activated carbon

Once treated, some water qualifies for return to the water cycle through rivers or to the ocean and some qualifies for water reclamation, which involves reuse in agriculture or industry.


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Since the move towards deregulation in the 1990s, the natural gas market has undergone an evolution shaping and changing participant’s roles. The gas market is subject to influencing factors such as technological changes and seasonal weather fluctuations, which requires gas market participants to find solutions to meet demands while simultaneously taking into account safe provisioning and costs. Roles in the natural gas market are also influenced by the fact that the majority of the natural gas consumed in the United States is produced within the U.S. Only a small amount of natural gas used comes from Canada and Mexico.

Natural Gas ConsumptionIn general, over the last three decades, natural gas consumption has declined across all end-use sectors, with the exception of electric power generation.  Approximately 1/3 of all natural gas produced and transmitted is ultimately used by the electric power generation sector in order to create electricity.


Natural Gas Production and DeliveryOver the past twenty years, the government has worked to remove regulations and rely upon competitive market forces to shape standards. However, regulation over transmission and distribution serve a functionary purpose to protect consumers against the monopolies that exist in those sectors of the gas market. Specifically, interstate pipelines are regulated through the Federal Energy Regulatory Commission (FERC) and local distribution companies (LDCs) are regulated through state utility commissions. These regulatory bodies ensure fair pricing and prevent preferential servicing.

As a flexible natural resource consumed by end customers as well as a method of generation for electric utilities, natural gas is processed through a delivery infrastructure that consists of producers, transmission, distribution, and retail.


Natural gas production began millions of years ago with the decay of organic material subjected to heat and pressure. As time progressed, this process created subterranean pocket deposits of coal, oil, and natural gas. Today, geologists use seismic surveys, the creation and study of vibrations on rocks, to find and develop the best approach to collecting these deposits.

Collection or gathering involves the placement of wells above deposits to harvest the upwelling resource once the surface rock is drilled. The raw, initial state of natural gas is known as wet natural gas due to the mixture containing gas hydrocarbons, liquid hydrocarbons, and gas nonhydrocarbons. After purification from a natural gas processing plant, the finalized product is referred to as dry or consumer grade natural gas. Processing Plants

Generalized Natural Gas Processing Schematic 1.2 Gas MarketThe principal service provided by a natural gas processing plant to the natural gas mainline transmission network is the production of pipeline quality natural gas. Natural gas mainline transmission systems are designed to operate within certain tolerances. Natural gas entering the system that is not within certain specific gravities, pressures, Btu content range, or water content level will cause operational problems, pipeline deterioration, or even pipeline ruptures.

Natural gas refinement involves several complex steps, which may vary depending on the composition of the natural gas retrieved at the wells. Some of the steps in the table and image below may be done in one processing plant, delegated out to multiple processing plants, or omitted based on the makeup of the unrefined resource. The steps for producing consumer grade natural gas are essential to safe storage, transportation, and use.



Gas-Oil-Water Separator Single or multiple-step removal of oil or water impurities by manipulating pressure
Condensate Separator Removes condensates and places them in separate storage tanks
Dehydration Completely removes all trace water and hydrates
Contaminant Removal Removal of all nonhydrocarbon gases (hydrogen sulfide, carbon dioxide, water vapor, helium, nitrogen, and oxygen) usually through amine solutions
Nitrogen Extraction Removal of nitrogen gas
Methane Separation Separates methane from natural gas (may occur with nitrogen extraction)
Fractionation Separates natural gas liquids (NGL) into its component hydrocarbons


Natural gas is delivered via high-pressure, long-distance major pipeline networks. These pipelines can be classified into three types of transmission pipelines:

  • Interstate Pipelines transport across state borders.
  • Intrastate Pipelines transport within state borders.
  • Hinshaw Pipelines receive from interstate pipelines and deliver within state borders to consumers.

From these large pipelines, natural gas flows through smaller pipelines called mains. Pipes directly connected to resident or commercial service points, called services, receive gas from mains.

Natural gas is highly pressurized as it travels through an interstate pipeline. To ensure the natural gas flowing through any one pipeline remains pressurized, compression of the natural gas is required periodically along the pipe. This is accomplished by compressor stations, usually placed at 40 to 100 mile intervals along the pipeline. The natural gas enters the compressor station, where it is compressed by either a turbine, motor, or engine. Storage

Natural gas storage allows inventory management to ensure steady and consistent delivery to consumers in spite of fluctuations due to changes in usage or production. Traditionally, natural gas has been a seasonal fuel. That is, demand for natural gas is usually higher during the winter, partly because it is used for heat in residential and commercial settings. Stored natural gas plays a vital role in ensuring that any excess supply delivered during the summer months is available to meet the increased demand of the winter months. Three main types of natural gas storage are:

  • Depleted Natural Gas or Oil Fields
  • Salt Caverns
  • Aquifers

Natural gas in storage facilities is used for two main purposes: meeting base load requirements and meeting peak load requirements. As mentioned, natural gas storage is required for two reasons: meeting seasonal demand requirements and acting as insurance against unforeseen supply disruptions. Base load storage facilities are used to meet seasonal demand increases, because they are capable of holding enough natural gas to satisfy long-term seasonal demand requirements. Typically, the turn-over rate for natural gas in these facilities is a year; natural gas is generally injected during the summer (non-heating season), which usually runs from April through October and is withdrawn during the winter (heating season), usually from November to March. These reservoirs are larger, but their delivery rates are relatively low, meaning the natural gas that can be extracted each day is limited. Instead, these facilities provide a prolonged, steady supply of natural gas. Depleted gas reservoirs are the most common type of base load storage facility.

Peak load storage facilities, on the other hand, are designed to have high deliverability for short periods of time, meaning natural gas can be withdrawn from storage quickly. Peak load facilities are intended to meet sudden, short-term demand increases. These facilities cannot hold as much natural gas as base load facilities, but they can deliver smaller amounts of gas more quickly and can be replenished in a shorter amount of time. While base load facilities have long-term injection and withdrawal seasons, turning over the natural gas in the facility about once per year, peak load facilities can have turn-over rates as short as a few days or weeks. Salt caverns are the most common type of peak load storage facility, although aquifers may also be used to meet these demands.


Natural Gas Distribution SegmentMore than 1,500 companies provide natural gas distribution services, these companies include local distribution companies (LDC) and mainline natural gas pipeline companies. LDCs account for 60% of natural gas delivery, mainly to residential end users. Mainline pipe companies account for the remaining 40% to large volume users such as electric power generation facilities. The diagram below outlines flows to and from LDCs and mainline companies along with end-user distributions. Local Distribution Companies

Local distribution companies typically transport natural gas from delivery points located on interstate and intrastate pipelines to households and businesses through thousands of miles of small-diameter distribution pipe. The delivery point where the natural gas is transferred from a transmission pipeline to the local gas utility is often termed the citygate, and is an important market center for the pricing of natural gas in large urban areas. LDCs can be organized into four types of business organizations:

  • Investor-Owned organizations have stock that is publicly traded, and the company functions through territorial contracts.
  • Privately-Owned organizations are owned by private investors and stock is not publicly traded.
  • Municipal organizations are owned and operated by a municipal government.
  • Cooperative organizations operate on a cooperative nonprofit for member benefit.


Natural gas marketing is a relatively new addition to the natural gas industry, beginning in the mid-1980’s. Prior to the deregulation of the natural gas commodity market and the introduction of open access for everyone to natural gas pipelines, natural gas marketers had no role.

Natural gas marketing is defined as the selling of natural gas. Marketers may be affiliates of producers, pipelines, and local utilities or may be separate business entities unaffiliated with any other players in the natural gas industry. Essentially, marketers are primarily concerned with selling natural gas, either to resellers (other marketers and distribution companies) or end users. On average, most natural gas can have three to four separate owners before it actually reaches the end user. In addition to the buying and selling of natural gas, marketers use their expertise in financial instruments and markets to both reduce their exposure to risks inherent to commodities and earn money through speculating as to future market movements. Customer Choice Programs

Natural Gas Consumer Rates By StateIn an effort to increase competition and level of service for end users, customer choice programs began in the 1990s. These programs allow customers to purchase natural gas from a supplier, who arranges delivery from a local natural gas utility. Since inception, participation across eligible states has increased steadily over the years. Large commercial and industrial consumers have had the option of purchasing the natural gas commodity separately from delivery services for many years. Participation in residential programs, which increased in the early 2000s, has largely leveled off in recent years.


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Commodity – “A kind of thing produced for use or sale, an article of commerce, an object of trade,” as defined in the Oxford English Dictionary. In the context of the utilities market, commodities electricity, gas, and water are considered commodities. However, a utility company may also offer services such as sewage, waste management, and broadband internet services. This section, provides an outline of the various commodities and services that utility companies offer.

The development of technology in the past few decades has made electricity ubiquitous in residences. Even with the advancements of home electricity generation technologies, electricity at home is still generally supplied by utilities. Electric utilities often participate in both electricity generation and distribution. One thing that differentiates electric utilities from other utilities is demand management. Since storage of electricity is generally difficult and costly, electric utilities may provide related services and programs to assist the timing of a customer’s electricity usage.

The second major contender in the energy sector is natural gas. On the industrial side, natural gas is commonly used to generate electricity. On the residential and commercial side, it is mostly used for cooking and heating. In the United States, natural gas is deregulated in many states, so gas utilities tend to rely on suppliers for the sourcing and delivery of natural gas. In Georgia for example, natural gas is a deregulated market. A utility such as Gas South does not distribute gas to the consumers. Atlanta Gas Light is the distribution company that owns the gas pipelines, connects and disconnects gas service, but Gas South is the provider bills the customer.

Water and sewer service operate on very different grounds and are often billed to the customer separately. Water utilities provide clean drinkable water in large quantities, while sewer utilities handle the disposal of waste water with a complex network throughout cities. The cost of each type of service is based on its complexity. Clean water is delivered to the consumer in pressurized pipelines from a central location – elevated storage tank and booster stations –  and has regulations regarding the cleanliness of the water. A sewer utility must collect and treat waste water in accordance with pollution and safety regulations and develop sewer plans for sewer systems. Due to the non-pressurized system, this is a more challenging problem than water distribution.

Waste management, sometimes known as solid waste management, is the process of collecting, transporting, treating, and disposing of waste. In the modern era, waste management is not as simple as pure disposal, but includes sustainability such as recycling, composting, and re-use. Aside from undesirable landfill disposal option, it is common for utilities to offer recycling programs, divert reusable products to charities, encourage the reduction of junk mail, or promote backyard composting methods to their customers.  A good waste management utility will consider the waste management hierarchy thoroughly to minimize pollution in land, air, and water and to conserve natural, economic, and energy resources where possible.




Energy Sources USAThe very first step into the electricity market is the generation of electricity. In the U.S., the main energy sources are coal (33%), natural gas (33%), and nuclear energy (20%). At a lower rate are renewable sources including hydropower (6%), wind (4.7%), biomass (1.6%), solar energy (0.6%), and geothermal energy (0.4%).

Electricity from these sources is primarily generated by some variations of turbine rotations. The most common medium for driving the turbines is steam. To create electrical energy with steam, water is boiled into steam to create mechanical energy to rotate turbines. Power stations generating power via steam are known as thermal power stations.

Once electricity is generated by the electric generator, the electricity is passed to a step-up transformer to increase the voltage for long distance transmission. By increasing voltage, the current can be kept low along transmission lines; this is a key factor to keep transmission costs low.



The basic goal of electrical power transmission is to transfer masses of electrical energy from a power generation site over a large distance to a substation. In the U.S., the network of transmission lines across the country is known as the power grid.

United States Transmission GridElectricity is transmitted at high voltages, 115 kV and above, to reduce the amount of energy lost in long-distance transmission. The two types of transmission are overhead and underground. Overhead transmission lines are commonly made from aluminum alloys because of its light weight, low electrical resistance, and low cost. Underground transmissions utilize cables, which consists of a conductor and an insulation layer which houses the conductor. The advantages of underground transmission are lower physical low visibility, less susceptibility to weather conditions, and low power loss. However, due to the high cost of underground transmission, overhead transmissions remains the more competitive method.

Before distributing the electricity to consumers, electricity is transmitted to a distribution substation.

The Continental U.S. power transmission grid is made up of about 300,000 km (186,411 mi) of lines. The lines are operated by approximately 500 companies, and the North American Electric Reliability Corporation (NERC) oversees all of these lines.



Electricity Distribution NetworkDistribution stations typically contain a step-down transformer to decrease the voltage from the transmission network to something much closer to a consumer’s required voltage. The first voltage drop at the distribution substation will take electricity to primary distribution lines. At this point, power is delivered to a busbar, a central location where power can be distributed in multiple directions. Closer to a customer’s premise, a distribution transformer further steps down a voltage to a consumers expected voltage. Here, the secondary distribution network will connect to a customer after going through a nearby service drop pole. In the rare case of large customers that require larger amount of power, a utility may decide to directly connect a customer to the primary distribution network.

In the past, the fine distribution network lines and the coarse transmission network lines may have been owned by the same company. Today, it is not uncommon to have separate ownerships due to the deregulated market conditions.



Economically, electricity is similar to other commodities; it can be bought, sold, and traded. The electricity market exhibits a dynamic supply and demand model due to factors such as weather, major televised sporting events, and holidays. However, electricity differs from traditional commodities because it cannot be stored easily, usually eliminating surplus in stock, rationing, and customer queuing.

A wholesale electricity market exists when competing generators offer electrical output to retailers. The retailers then re-price the electricity and take it to market. While wholesale pricing used to be the exclusive domain of large retail suppliers, increasingly markets are beginning to open up to end-users. In the U.S., wholesales are often made across states and require interstate regulations. The wholesale market can be entered by any company that passes various approvals, can generate electricity onto the power grid, and secure sales. Trading is open to organization or individuals interested in buying or selling electricity in the wholesale market. The trader is not required to have any association with any part of the electricity generation, transmission, distribution or consumption.

Electricity is ultimately sold to a consumer by the electricity provider; the act of the sale is electricity retailing. Broadly speaking, monopoly supply or supply by choice – depending on whether a consumer is based in a regulated or deregulated electricity market – are the two types of retailing. As opposed to a regulated electricity market, in a deregulated market, consumers may choose electric providers based on pricing, services, maintenance, etc.

A retail electricity market exists when end-use customers can choose their supplier from competing electricity retailers; one term used in the United States for this type of consumer choice is ‘energy choice.’.A separate issue for electricity markets is whether or not consumers face real-time pricing (prices based on the variable wholesale price) or a price that is set in some other way, such as average annual costs. In many markets, consumers do not pay based on the real-time price, so have no incentive to reduce demand at times of high (wholesale) prices or to shift their demand to other periods. Demand response may use pricing mechanisms or technical solutions to reduce peak demand.

Generally, electricity retail reform follows from electricity wholesale reform. However, it is possible to have a single electricity generation company and still have retail competition.

Deregulated or not, residential consumers are generally charged a fixed service fee and a separate charge based on the amount of energy consumed over a period of time, usually one month. For commercial and industrial customers, more complex pricing tariffs could depends on more variables such as peak demand, time of use, or reactive power.



As mentioned above, regulatory bodies are responsible for providing operational oversight in the electric market. These organizations are known as ISOs and RTOs and are governed by the Federal Energy Regulatory Commission (FERC); currently nine ISOs and RTOs operate in North America, serving over half of Canada and two-thirds of the U.S.

RTO and ISO Council, IRCRTOs may be responsible for a larger geographical area than ISOs, but they serve similar purposes: plan for the electric industry’s infrastructures across service areas, regulate fair and open trading in the electricity market, and ensure reliable and efficient transmission systems. RTOs and ISOs will coordinate generation and transmission across regions to keep a healthy balance between supply and demand, which protects both electricity providers and the consumers by lowering the risk and cost involved in the electricity market.

Creating a reliable power grid often requires different regions of service areas to work together. RTOs and ISOs will engage separate markets to work together and extend networks, provide back up to the regional grids, cut excessive overheads, and ultimately provide more reliable and low-cost electricity to the consumers.



Public utilities maybe be publicly owned or privately owned. In both cases, PUC is required to regulate various business operations and services conducted by the public utility.

One example of regulation is the process of ratemaking. Any adjustments made to rates by the public utility must be proposed to a PUC so it can be thoroughly examined to ensure electricity is charged at a reasonable cost to consumers. To support a rate case proposal, a public utility typically justifies an increased rate by providing evidence of operating expenses and the efficiency and reliability of service delivered to consumers. Since electricity is deemed such a necessity in the modern world, the rates placed by a utility can become political as the rate needs to be fair and equal across all socioeconomic groups.

Some other examples of a PUC’s realm of responsibility may include: infrastructure and reliability, metering standards, recording and reporting, transmission and distribution, and sourcing of energy.

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