Utilities are important for everyday life. We wouldn’t have clean water or fresh foods without the proper utilities to make sure that their operations and maintenance go smoothly. These utilities are regulated quite a lot, but why is that the case? If you have ever wondered why it is that utilities have such strict guidelines, then you’ve come to the right place.

Investor-owned utilities, which are private companies with ownership shares held by stockholders, serve the majority of electricity and natural gas customers in the United States. These utilities are primarily regulated at the state level, where public service commissions are responsible for overseeing and authorizing investment decisions, operations and customer rates.

Publicly-owned utilities – which include rural electric cooperatives, municipal utilities and federal or state power authorities – are not generally regulated by state public service commissions. They are overseen by a variety of somewhat comparable organizations such as co-op boards, municipal governments, or federal regulators.

Beyond program cost recovery, utilities face key financial disincentives and barriers to investments in energy efficiency. Because of this, leading states have enacted regulations and policies to create new business models for their investor-owned utilities. These models eliminate the financial disincentives that prevent utilities from saving energy and provide incentives for developing successful and effective energy efficiency programs.

State policymakers and regulators also can provide clear direction to regulated utilities about the importance of energy efficiency. As a first step, legislators and regulators typically require utilities to offer programs; they also set up mechanisms for utilities to recover their costs through rate case proceedings. A recent trend has been for states to establish specific energy savings targets for regulated utilities. Such energy efficiency resource standards are in place in a large and rapidly growing number of states.

All of this means that utilities are safe and cost effective for those running them and still highly beneficial to those they supply. Running a government is tough, but managing utilities is a major facet of it. By making sure everything is within the standards set, it makes everything else that much easier to handle. Technology in government has to be strong to meet the needs of the public.