Investor-owned utilities -- often called IOUs -- operate like any other capitalized business. They sell stocks and bonds to outside investors to raise capital to buy equipment. The equipment is then used to produce electricity, which is sold to consumers for enough money to pay operating costs, and to pay the investors enough return in order to make their investments worthwhile.

Large Power Plant PictureInvestor-owned utilities are typically large, and serve major population and commercial centers. IOUs typically own all facets of the electricity producing system, from the generating plants right down to the meter at a customer's location.

Nationally, a variety of governmental agencies become involved in regulating utility operations, ranging from the Federal Energy Regulatory Commission and Federal Power Commission to the Environmental Protection Agency and the Securities and Exchange Commission.

On the state level, investor-owned utilities are typically regulated by a Public Utilities Commission, Public Service Commission, or State Commerce Commission. Such state bodies are usually a utility's most immediate concern, and are the source of most regulations which comprise a utility's monopolistic structure. A state commission tells a utility whether, where and how it can acquire land and install new equipment; how it may conduct its accounting and customer bill-paying policies; what type of advertising it may do; and, most importantly, how much it may charge customers for electricity.

Two leading industry associations geared largely for investor-owned utilities are the Edison Electric Institute, EEI, and the Electric Power Research Institute, called EPRI. The Edison Electric Institute is headquartered in Washington D.C. and assists utilities primarily with their lobbying and marketing efforts. EPRI, headquartered in Palo Alto California, concentrates its efforts in the areas of collaborative technology research and demonstration.