Companies in the public utilities sector include firms that provide essential public services. This includes natural gas, electric power, and water and wastewater services to residential, commercial, and industrial properties. Other services offered by utility companies also include clean and renewable energy sources like wind energy and solar power, and telecommunication services such as cable, internet, and television services.
As Americans, public utility services are something most people don’t think about all that much — that is, until we don’t have them. We often take these services for granted until we lose power during the warmer months and the air conditioning dies, or our internet connection suddenly cuts out during a video conference.
Obviously, public utility companies are an integral part of our daily existence. Today, we’ll take a look at different companies in the public utilities field, how it’s evolving, and the pros and cons of investing in this industry.
About the utilities sector
Before we get into exactly what companies are in the public utilities field, let’s take a closer look at the utilities sector and what kinds of firms are involved in producing, providing, and delivering these vital public services.
Utility companies are generally large corporations that provide a multitude of services to their customers or may only offer a single service, such as natural gas utilities or water and sewer services. The firms that deliver these services to your door are often subsidiaries of the major corporations going by a variety of business names.
In addition to the basics of natural gas, electric power, water, and sewage services, some companies focus on energy efficiency alternatives, such as renewable energy like solar panels and wind turbines. Also, many “traditional” utility firms are now branching out into these areas of renewable energy as the world moves toward cleaner energy sources and a greener planet.
Industries included in the consumer non-durables field
- Natural gas companies
- Electricity companies
- Telephone/communication companies
- Water companies
- Steam companies
- Hydraulic power companies
Commonalities of the public utility industry
The public utilities sector is a capital-intensive and heavily regulated industry. This means they depend upon a constant influx of funding to finance frequent and expensive infrastructure upgrades, infrastructure maintenance, and new asset purchases.
Despite the ongoing need for cash flow, utilities are generally considered very stable and often become a more popular investment during times of economic downturns or recessions. This is because they tend to offer consistent dividends to investors while having much less price volatility when compared to the rest of the market.
However, during times of economic growth, public utilities tend to become less popular with investors because the gains are slower than other, riskier securities. Still, many investors that put money into public utilities tend to view them as long-term investments because of the stable returns and resistance to economic downturns.
For example, back in the 70s and 80s utility providers were faced with a lot of challenges. They were looking at huge debts, blackouts, fuel costs rising astronomically, and increasing regulations. Some went bankrupt, but those who survived and are still around today have proven the ability to withstand even the most trying circumstances.
That’s why, when the overall market isn’t doing well, utility providers still manage to thrive and are considered among some of the safest and best investments for stable returns and slow but steady wealth building.
What companies are in the public utilities field?
As previously stated, a public utility is a firm that delivers natural gas, water, electricity, or telecommunications services to residential and commercial operations. They are integral to our way of life but sometimes go unnoticed, despite their size and reach in our communities.
The following is not meant to be a comprehensive list of all the major players in the public utilities sector, but instead to give you a snapshot of how and where a public utility company operates as part of our local and global public utilities infrastructure. These firms and more, however, are developing and working towards greener energy efficiency by using renewable resources.
- AES Corporation
- American Electric Power
- American Water Works Company, Inc.
- Duke Energy
- Edison International
- National Grid plc
- Pinnacle West Capital Corporation
- Southern Company
Natural gas companies
One of America’s largest energy holding companies, Duke Energy is headquartered in Charlotte, North Carolina, and primarily serves the Southeastern United States and lower Midwest. As of 2022, more than 8 million customers’ electricity needs are served by the company’s regulated utility activities, with another 1.6 million receiving natural gas utilities.
National Grid plc
Headquartered in London, National Grid plc (now known simply as National Grid) is the United Kingdom’s largest natural gas distributor. It also owns and manages electric transmission networks in both the UK and the United States.
Southern Company customers count more than 9 million served through its electric and natural gas subsidiaries. Founded in 1924, Southern is the second largest utility company and has a goal of net zero greenhouse gas emissions by 2050 through its expansion into renewable energy sources.
Based in Arlington, Virginia, AES Corporation is the largest independent energy generator in the world and owns or operates more than 150 power plants around the world. Committed to accelerating the growth and adoption of clean energy efficiency, it allied with Google in 2019 to help pioneer innovation in the public utilities field.
American Electric Power
In 1906, a bunch of small utility companies in the South and Midwest came together to form American Gas and Electric. Now known as American Electric Power, the company is one of the largest suppliers of electric power in the United States with 2021 revenues of $16.8 billion and 5.5 million consumers.
A multinational holding company, Edison employs more than 13,000 people and had core earnings of 1.74 billion in 2021. It trades on the NYSE under the symbol EIX.
Through its subsidiaries, it generates and distributes electric power and provides energy services and technologies (including renewable energy). Edison International conducts business in many countries, including the United States, Chile, and the Philippines.
Pinnacle West Capital Corporation
A public utility company based in Arizona, Pinnacle West Capital Corporation owns primarily electric utilities subsidiaries. This includes Arizona Public Service Company (APS), the largest electric company in Arizona.
Pinnacle also has holdings that build and operate solar infrastructure in the electric utility industry and is committed to eventually provide its customers with 100% clean and carbon-free energy by 2050.
AT&T is the world’s oldest telephone provider and began as the Bell Telephone Company in 1875. It eventually evolved into American Telephone and Telegraph Company (AT&T) in the 1990s. Today, it’s one of the leading telecommunications corporations that provides important solutions such as mobile phone services, broadband, high-speed internet, and cable.
Another U.S.-based telecommunications giant with a presence around the globe, Verizon (NYSE and Nasdaq: VZ) generated more than $133 billion in 2021 and employs more than 130,000 people worldwide. It primarily provides voice, data, and video services and solutions on its many networks and platforms.
American Water Works Company, Inc.
American Water is the biggest publicly traded and possibly the most geographically diverse wastewater utility company in the U.S. It trades on the New York Stock Exchange (NYSE) under the ticker symbol AWK and delivers water, wastewater, and related services to an estimated 14 million customers in 24 states.
How to invest in public utility companies
Whether you want to invest in companies that provide electricity, water utilities, natural gas, water and wastewater services, or other services, there are plenty of options. You can buy individual utility stocks or bonds, for example, or invest in exchange-traded funds (ETFs) to give you broader exposure to the public utilities industry.
Investing in individual stocks can be risky, but an ETF combines a basket of assets — in this case, multiple public utility companies — thereby diluting the risk to investors. A utility ETF might include an electric company, corporations that offer water services or natural gas utilities, own power plants, or a combination of all of those essential services and more. The brokerages below make it easy to invest in ETFs.
Pros and cons of investing in the public utilities sector
We’ve already covered that investing in public utilities is generally considered a safe and stable investment with consistent dividends. But it’s also important to note that, because of the debt loads they carry on their balance sheets, public utilities can be vulnerable to interest rate risk.
Financial analysts would agree that, as with any investment, it’s important to weigh the advantages and disadvantages of investing in public utilities before acting.
Here is a list of the benefits and drawbacks to consider.
- Reliable dividends
- Less price volatility than other securities
- Safer investments during economic downturns, comparatively speaking
- Heavily regulated, and utilities require expensive infrastructure upgrades and maintenance
- Utility services are more vulnerable to interest rate risk because of high debt loads
- Tend to be less favorable investment opportunities during times of economic growth
- Public utility firms include companies that provide electricity, natural gas, water services, and other vital services to residential, commercial, and industrial properties.
- As the industry moves toward cleaner energy, more utility companies are expanding into renewable energy options such as wind turbines and solar panels.
- Utility companies are highly regulated and require regular infrastructure upgrades and asset purchases.
- Public utilities are generally considered long-term investments and become more sought after during economic difficulties as they are safer and steadier than other securities.
- There are many ways to invest in this industry, including utility stocks, bonds, and ETFs.
- When the economy is on an upswing, public utilities are often considered rather conservative investments and thus tend to fall out of favor.
View Article Sources
- Environmental, Social and Governance (ESG) Investing — U.S. Securities and Exchange Commission
- Home Page — Federal Energy Regulatory Commission
- Federal Energy Regulatory Commission — USA.gov
- Investor-owned utilities served 72% of U.S. electricity customers in 2017 — U.S. Energy Information Administration
- What Companies are in the Basic Industries Field? — SuperMoney
- What Companies Are In The Capital Goods Field? — SuperMoney
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- How Many Jobs Are Available in Industrial Machinery/Components? — SuperMoney
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- Beginner’s Guide to Investing — SuperMoney