Page 124

moving toward the latter and as such will be forced to consider the opportunities offered through telecommunications and information services to a much greater extent. As is discussed below, this is fortuitous for the deployment of the NII. It supports the vision that it is possible to create an information infrastructure and the tools to support smart energy decisions by all consumers and lessen the U.S. balance of payments and dependence on foreign energy sources.

Many electric utilities have extensive telecommunications facilities that they use for conducting their business—maintenance and operation of their generation and distribution systems to ensure reliability and quality of service to their customer base. But some utilities rely on services provided by telecommunications providers. Important assets that utilities bring to the table that could be used in providing telecommunications services for themselves or others include extensive rights-of-ways extending to businesses and residences, a ubiquitous presence in residential and business locations, and extensive system facilities (such as conduits, poles, transmission towers, and substation sites) that could be used in telecommunications networks.

The FERC recently announced a Notice of Proposed Rulemaking (NOPR) that outlines the mandate for the electric utilities to open their transmission facilities to all wholesale buyers and sellers of electric energy 2R. Included in the NOPR is a notice (RM95-9-00) of a technical conference on "real-time information networks" (RINs) that would give all transmission users simultaneous access to the same information under industry-wide standards. Thus it is clear that within a relatively short time frame, the need for this information system and telecommunications service will directly affect the 137 utilities required to open up their transmission facilities.

The Organization of the Electric Utility Industry

There are three main categories of electric utilities today—the investor-owned utility (IOU), the municipal utility, and the rural cooperative. A fourth, often-discussed utility is the registered holding company (RHC), a subcategory of investor-owned utilities. These are the multistate, investor-owned holding companies that must be registered with the U.S. Securities & Exchange Commission (SEC) under the Public Utility Holding Company Act (PUHCA). Reform of this act is being considered.

When the electric utility industry was born late in the nineteenth century, it appeared first in the form of IOUs with the corresponding corporate charters shaping its existence. As electric service spread and came to be viewed as a necessity rather than a luxury, public discontent grew with the selective nature of the coverage provided by the IOUs. By 1900, many cities and some counties had created a municipal utility as a unit of the local government, with the charter to provide service to all its constituency. Financing was primarily through tax proceeds and future system revenues. Later, during the New Deal, the rural cooperative was born as a customer-owned, not-for-profit membership corporation. This progression of organizations was driven by requirements of customers and (to some extent) strategic objectives of the industry. This progression continues today, albeit in a somewhat different form.

About 95 percent of the U.S. population is served by the electric utilities 3R. Of these customers, 76.4 percent are served by IOUs, 13.7 percent by municipal utilities, and the remaining 9.9 percent by rural cooperatives 4R. Few can choose their supplier of electricity—in most cases it has to be the local provider. However, the possibility for options in choosing a provider offered through what is referred to as "retail wheeling" could make more competitive choices available 5R.

Utility Authority with Respect to Telecommunications

Each utility organizational type functions differently within regulatory environments that vary according to jurisdictional boundaries. As discussed extensively in a report examining these issues, all have legal authority with respect to telecommunications to build infrastructure and to deliver at least some telecommunications-based services related to the delivery and consumption of energy 6R. It is legally sound, though possibly contentious, for a utility to build the facilities needed to communicate with its customers and possible suppliers and to develop the information services needed for effective energy management. However, the reaction of regulators and