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David E. McNabb

Chapter 4 is an introduction to the electric power sector of the utility industry. The electric power industry is made up of a number of different participants, the majority of which are investor owned. At the most basic level, the segments can be grouped into two broad categories: buyers and sellers. Buyers of power are divided into three classes: residential, commercial, and industrial. On the seller side are five main types of organizations: investor-owned utilities, publicly owned energy utilities, rural electric cooperatives, federally owned utilities, and independent power producers. In 2015, investor-owned utilities supplied electricity to 68.4 percent of the total number of customers U.S. generating capacity and were responsible for 74 percent of all retail sales of electricity. Publicly owned utilities include municipal utilities, public power districts, irrigation districts, and rural electric cooperatives.
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David E. McNabb

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David E. McNabb

Utility industry leaders are nearly unanimous in agreeing that a number of external forces are becoming increasingly pressing as managers and administers work to shape the public utility workforce. These old problems, in turn, are only going to become more pressing over the next decade or longer. The fundamental problem is the difficulty of simply finding enough workers with the necessary skills to replace the many aging “baby boom” workers entering retirement. In addition, there is no doubt that the United States workforce is changing from a majority of white males—the traditional utility workforce—to becoming a majority of minority men and females of all ethnic persuasions. Human resource departments are responsible for managing a variety of employee benefit plans. Among the most costly of these benefit programs is the retirement fund. Retirement plans for investor-owned utilities are often more complex than plans managed for employees in publicly owned utilities.
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David E. McNabb

Chapter 5 is an introduction to the natural gas utility sector. Activities in this industry are divided into three categories: upstream, midstream, and downstream operations. Upstream operations are activities performed by exploration, drilling and production companies. Midstream activities include the gathering of gas, processing it into its component hydrocarbons such as butane, propane, ethane, and methane, and removing other contaminants such as water and sand. The final activity in the stage is the above and below ground storage of gas. Downstream activities include the interstate pipeline companies that move from regions where it is produced and processed to the communities, commercial and industrial end users of the gas. Local distribution companies may consist of companies owned by equity shareholders, local governments or independent nonprofit utilities.
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David E. McNabb

There are three major classes of public transportation systems: (1) those that serve metropolitan areas, (2) rural area systems, and (3) services managed by nonprofit organizations that operate demand response services exclusively. Nonprofit organizations are eligible for federal financial assistance to purchase vehicles and offer their demand services. Not included are school bus systems. Transit system buses, ferries, trains, and planes are all regulated by the U.S. Department of Transportation if they are used to transport people or cargo across state lines. Buses, ferries, and trains that do not cross state lines are regulated by the states in which they are registered and operate. The Americans with Disabilities Act of 1990 (ADA) mandated that no person with a disability may be denied the opportunity to use the public transportation system.
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David E. McNabb

This chapter introduces readers to the diverse nature of the public utilities sector in the United States. After defining the electric power, natural gas, water and wastewater, solid waste and public transportation sectors, the chapter explains the justification for utilities’ natural monopolies designation. The chapter then moves to a history of the industry leading to the factors that shape the industry in the twenty-first century. For public utilities in general, many, but not all, of the problems they faced in the last several decades of the twentieth century have been solved. However, new challenges to maintaining sustainability have arisen to replace those that have been addressed.
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Public Utilities, Second Edition

Old Problems, New Challenges

David E. McNabb

A thoroughly updated introduction to the current issues and challenges facing managers and administrators in the investor and publicly owned utility industry, this engaging volume addresses management concerns in five sectors of the utility industry: electric power, natural gas, water, wastewater systems and public transit.
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David E. McNabb

Utilities’ environmental challenges result from operations and processes that have negative effects on the sustainability of the environmental quality and well-being of the organisms living in it. Utility operators and managers must know how to deal with environmental problems; they have been required to do so since the 1970s and even earlier. Environmental regulations are challenges associated with preserving the health, safety and employment of workers as well as customers and the public in general. Sustainable operations under the existing period of climate change are a challenge. Maintaining sustainable delivery of services in the face of population growth and demographic changes is a challenge. This chapter reviews how utilities are developing the means and willpower to survive and thrive in the face of a host of challenges based in our natural environment.
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David E. McNabb

The public utilities finance function requires decision-making in at least four principal areas: (1) capital structure, which refers to the ratio of debt to equity in the financing of the organization; (2) the operating expense and investment structure, which are influenced by the regulatory environment; together, these heavily influence the utility’s allowed return on investment; (3) the acquisition and cost of capital, which are shaped by the financial strength of the utility; and (4) working capital requirements. Traditionally, service revenues were sufficient to cover operating costs on a pay-as-you-go basis, while capital improvements were financed through borrowing or grants. For publicly owned utilities, the traditional structure is changing, however. Fewer federal or state grants are available and loans are very hard to come by. This chapter discusses the need for rate increases to fund operations and capital improvements.
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David E. McNabb

Governance is the process of managing the operations of organizations and their relationships with their internal and external stakeholders. In most industries strategy is decided by directors and senior officers, while the responsibility for carrying out operations is delegated to managers and supervisors. In rural areas, utilities are often owned and governed by consumer cooperatives, local utility districts, or by a public utility district (PUD). In urban areas, utilities are either governed by an elected governance body, by managers appointed by elected city officials. Oversight of both public and investor-owned electric and gas utilities is most often exercised through state and local regulatory authorities. Ownership of water and wastewater utilities has followed a municipal or mutual model. However, more of these systems are being sold or leased to private operators, while in others a number of traditional utility services are now contracted out to the public sector—the practice of outsourcing.