INDUSTRY PARTICIPANTS

The electric power industry is a collection of utilities, generating companies, transmission companies, distribution companies, and energy suppliers. Transmission companies move electricity from the generation source to the various delivery points through a network of high-voltage electric transmission lines. Distribution companies own and operate the wire systems that connect to the transmission grid to take delivery of the electricity from transmission companies for redelivery to end-users, which include residential, commercial, and industrial consumers. For example, see the diagram of the electric delivery network below, depicting the transmission and distribution of electricity from the generation source to the load. The electric power industry in the U.S. is becoming increasingly diverse, and includes any entity producing, selling, or distributing electricity. Industry participants include the traditional electric utilities, such as investor owned utilities ("IOUs"), electric cooperatives, and government-owned utilities, such as municipal, state, and federal utilities. Additionally, many new players have emerged as competition advances in the wholesale and retail electric markets. These new participants primarily are non-utility generators and suppliers.

Utilities consist of IOUs, cooperatives, municipals, and state and federal utilities. IOUs are tax-paying businesses subject to state and federal regulation and owned by shareholders through financing by the sale of stocks and bonds to the general public. Cooperative utilities are generally operated as not for profit corporations owned by their customers. Government owned utilities include municipal systems, public power districts, and federal power marketing agencies such as the Tennessee Valley Authority.

As a group, IOUs are the largest group among the various other utilities and other industry participants. As a group, IOUs are dominant in size and market influence. Most IOUs are vertically integrated companies, in that the same holding company owns the power generating company, the transmission delivery company, and the electric distribution delivery company (sometimes called an "EDU"). Traditionally, IOUs were regulated as monopolies, subject to cost-based rates permitted to earn a rate of return (commensurate with risk) on their investment required to provide electric service.

Non-utility participants include co-generators, small power producers, independent power producers, merchant generators, and power marketers and brokers. While IOUs once dominated power generation, competition has resulted in new non-utility companies that produce and market power. Electricity marketers or brokers act as intermediaries between power buyers, such as end-users or other power buyers, and all the other above-mentioned participants. Usually, power marketers or brokers coordinate the sale and delivery of electricity from the generation source to end-users' facilities, including the ancillary delivery services such as nominating and scheduling electricity on transmission and distribution delivery systems to deliver electricity to the end-user. Due to increased competition in the wholesale power market, marketer and broker power sales have grown dramatically. For example, marketer and broker power sales jumped from 27 million MWh in 1995, to 1.2 billion MWh in 1997, and to 2.7 billion MWh in 1999.