Public Utilities Essay ⋆ Political Science Essay Examples ⋆ EssayEmpire

Whether publicly or privately owned, it is the job of a public utility to handle and maintain the operation of a public service. Usually, a public utility has a natural service monopoly. While its own consumers own a publicly owned utility, investors own a privately owned utility. A few examples of public utilities include an electric utility, roads and toll ways, public transportation, telecommunication, heat generation and distribution, natural gas distribution, waste disposal, water purification and distribution, and sewage treatment and disposal.

A public water department is regulated to purify and distribute water to the consumers of its given area. To be a public water system, there must be at least fifteen service connections, or an average of at least twenty-five individuals served daily at least sixty days out of the year. In 1805, the first large American city to consider water distribution a municipal responsibility was Philadelphia, born out of a yellow fever epidemic that had to do with an unhealthy water supply. In his will, Benjamin Franklin gave the city one hundred thousand pounds to develop a suitable water supply for the residents and industries of the city. The city waterworks was subsequently created to pump water in from the Schuylkill River into two pumping stations through wooden pipes. One of these pumping stations was on Chestnut Street, while the other was at Centre Square. A watering committee was created and helped in providing stability that made Philadelphia one of the most prosperous cities during the Industrial Revolution. The waterworks served as a model for thirty other cities.

Before electricity was a public utility, it was a very expensive and very difficult business to run. There were a number of different companies offering different services. While some companies offered electricity for homes, others offered it for street lamps or commercial use. To be able to offer service for any of these different areas, an electric company also needed to acquire franchise rights from the local municipality. A few companies, one such ran by Samuel Insull, noticed that the cost of maintaining power plants to create electricity and then to only distribute to a specific sector of the public was unprofitable. It wasn’t worth the high investments in the plants to only serve a few. Insull discovered that if he could go above serving specific sectors and actually serve each of them at different times, the price of electricity would be affordable to citizens, and it would be a profitable business. In a move to a public utility, observations at the time determined that one large operating plant would be cheaper than many smaller ones.

Still, the problem of franchise rights lowered investor confidence and thus hindered profit. Many in the industry decided it would be more profitable if, instead of consulting the city council every time, to instead operate through a nonpartisan state agency. Insull subsequently proposed that a state agency regulate prices and standards. The companies favored the idea of attracting more customers, and the customers were pleased to know that the companies were doing what was best for the consumer. In 1916, thirty-three states created these nonpartisan state agencies to regulate the industry. Today, most of these companies are privately owned utilities with a large shareholder investment base.

While often seen as a problem, the monopolization of these industries actually profits the consumer and the company. State agencies must be created in order to accomplish all the goals for any public utility. This is because heavy governmental support is needed when the distributed products become a necessity of living; a middle ground between profit and affordability must therefore be established.

Bibliography:

Edison Electric Institute. “History of the Electric Power Industry.” www.eei.org/whoweare/AboutIndustry/Pages/History.aspx.
Fairmount Water Works Interpretive Center. “About the Fairmount Water Works.” www.fairmountwaterworks.org/about.php?sec=3.
Roberts, Christopher. “The Waterworks: A Place ‘Wonderous to Behold.’” Delaware River Commission. www.state.nj.us/drbc/edweb/waterworks.htm.
Sullivan,Thomas F. P. Environmental Regulatory Glossary. 6th ed. Rockville, Mass.: Government Institutes, 1993.

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