Energy Regulatory Framework

Each state manages their energy generation, transmission, and distribution differently. However, the following components make up the general energy regulatory framework regardless of location.


Regulatory Body

Government entities oversee the rates and services of public utilities and enforce the standards established by state law. These bodies are often called a utilities commission, utility regulatory commission, public utilities commission, or public service commission.



Companies generate and distribute energy — in the form of electricity or natural gas — through a regulated market. They are monitored by local and national governmental bodies. Utilities can be cooperatives, nationalized entities, publicly owned, or privately owned. Although there are other companies that may purchase and sell energy, they normally do not facilitate the generation transmission or distribution facilities.


Independent Power Producers

Independent power producers (IPPs), also known as non-utility generators (NUGS), are producers of electrical energy, but are distinct from public utilities. IPPs and NUGs produce energy to sell to utilities or the general public. IPPs and NUGs can be privately owned corporations or cooperatives, for example, solar or wind energy producers, or industries with excess energy. Before the U.S. public Utility Regulatory Policies Act of 1978, these independent producers were sparse. However a section of the act mandates that utilities buy energy from NUGS at the utilities’ avoided cost, thereby affording NUGs the ability to reap a reasonable price for alternatively produced energy, and ensuring that energy is not wasted.



Regional transmission organizations (RTOs) transport electricity over large interstate areas. They regulate and administer electricity transmission grids. Independent system operators (ISOs) form when recommended by the Federal Energy Regulatory Commission (FERC). They manage the electrical power system for an entire state, or multiple states, covering a larger geographic area than RTOs. Utilities can also manage their distribution, but all of these entities fall under the jurisdiction of the North American Electric Reliability Corporation (NERC). NERC oversees the bulk of the United States, Canada, and very small portion of Mexico’s electric interconnections. 



Distribution systems transport electricity from the transmission system to individual consumers. Throughout the system are stations that decrease the voltage to a medium level. This medium voltage power is carried to consumers’ properties, where it is then further lowered to the voltage for general household use. Consumers that use large amounts of energy may be connected more immediately to transmission systems.