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For most of early human history, fire was the main source of energy people used. Wood, charcoal, and then coal provided fuel for fire. Over the years, however, people acquired a more sophisticated knowledge of fuels and energy. This resulted in the development of many types of power sources and the generation of electricity and production of natural gas.
The natural gas industry formed in the early 19th century. The first gas company was founded in 1812, in Great Britain. Five years later, the first American company opened in Baltimore, Maryland in 1817. However, the oil rush of 1859 and the introduction of the electric light in 1879 thwarted the natural gas industry, which had been the primary energy source for lamps. It may have lost its share of the lighting market, but gas was still the primary fuel for cooking and maintains a large share of that market today. Natural gas is delivered to consumers through underground pipelines at high pressure. The pressure is reduced before it is flows into a customer’s home gas line, which typically begins at the curb and extends underground in a pipeline to the basement or utility room. Each customer’s usage of natural gas is measured in ccf, or cubic feet of gas.
Until the 1930s, hydroelectric power was responsible for providing most electricity because hydroplants were less expensive to operate than those that relied on thermal energy released by burning fuels like coal. Today, hydroelectric plants, which are often located at river dams, are only one source among many for generating energy. Hydropower supplies about 10 percent of the nation’s energy, according to the U.S. Department of Energy.
Although alternative energy sources such as nuclear, solar, and wind energy continue to gain market share, the primary means of generating electricity in the United States and much of the world is still coal-burning power plants. Simply put, coal is burned to turn large turbines, which generate the electricity. The electricity is then transmitted overhead on power lines to substations at very high voltages. Substations step down the energy to lower voltages, and then distribution lines transmit the energy to individual homes and businesses.
As the electric industry built its infrastructure, public utility commissions were put into place to regulate them and natural gas companies. Eventually, some cities chose to operate their own electric and/or natural gas operations, while others left them in the hands of the for-profit businesses. The PUC-regulated model for utilities worked well in the United States for many decades. Power companies were able to request rate hikes to cover the construction of new power plants and other costs. Commissions usually granted these hikes because they allowed utilities to build or improve infrastructure and the increased capacity was needed and resulted in reduced rates in the long run as the supply met or exceeded demand. However, by the 1980s, construction costs escalated so fast that rate hikes did not result in reduced rates later. The public as well as government officials thought that perhaps it was time to deregulate the industry and introduce more competition to the markets.
In 1992, the U.S. government passed the Energy Policy Act. Among many other changes and regulations it introduced, it also created a new type of company in the industry: exempt wholesale generators. These companies could generate power using any method, and they were exempt from the Act’s energy efficiency measures. This meant that existing utility companies were required to open their transmission systems to other companies, who were the wholesale brokers. Brokers took the form of new departments in existing power companies or independent power brokers, who sold cheaper power from one region of the country, to another region that needed it. They might also resell the electricity to large manufacturers. All of the sales were on a wholesale basis. No additional regulations have been enacted to broaden this model and include retail sales.
In the future, electricity will be produced by a variety of sectors, including solar and wind energy. The Energy Information Administration said that renewable energy contributed about 4 percent of the total power generated in 2009 in the U.S. and it is expected to increase to approximately 6.5 percent by 2035. The most current trend in the electric generation industry is to convert coal-burning power plants to natural-gas plants. Natural gas emits much lower quantities of greenhouse gases, and the Environmental Protection Agency has set new levels of permitted greenhouse gas emissions of all newly constructed power plants.