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Porter Analysis Electricity Industry

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Submitted By toyeolat
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Regulated Electricity Utility Industry
The electric utility industry generates, transmits and delivers electrical power to consumers, businesses and governments. Today there are three primary business structures in the regulated electrical utility industry—public companies owned by shareholders, municipally owned companies, and those owned and operated by the federal government. Shareholder owned companies are the largest group, providing half of all electricity in the United States.
Burning fossil fuels to power steam turbines produces over half of electricity consumed today.1 Other generation methods include harvesting the power of nuclear reactions to power turbines and, increasingly, renewable methods such as wind or water-powered generation. Unlike most manufactured products electricity cannot be stored, so a complex and delicate fabric of transmission systems (know as the power grid) exists to deliver power when and where it is needed. Many firms involved in the generation of power are also involved in its transmission and sale to end-users, making vertical integration commonplace within the industry. This end-to-end integration, as well as end users’ dependence on electricity, has led to historically strict government control of the industry. The most significant piece of regulation in the last century was known as the Public Utility Holding Company Act of 1935 also known as PUHCA. The act had a profound effect on the regulated electrical industry. First, and most importantly, it set limits on the rates that electricity and natural gas companies could charge payers. Secondly, it restricted the ownership structure of firms involved in the electrical utility industry, preventing non-utilities from owning interest in regulated businesses. Third, it formalized the jurisdiction that federal, through the Securities and Exchange Commission, and state

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