A public utility provider provides essential services to communities. These services include electricity, heat, trash removal, and road repair. Public utility companies include cable, Internet, and telephone providers, natural gas providers, oil delivery services, waste management providers, and electricity providers.

What Are the Public Utilities’ Duties?

Public utilities are companies that are either owned by a municipality, or are privately owned. For privately owned public utilities, the private owners are the companies’ shareholders. Privately owned public utilities have a twin responsibility. They must satisfy shareholder concerns. These public utilities make money through a procedure known as “rate of return” regulation. 

Essentially, the government, in exchange for giving the utilities a monopoly, gets to set the price utilities can charge customers. Ultimately, privately owned public utilities (which the government keeps free of competition) are permitted to earn profit, called return on equity. This profit is given to shareholders. At the same time these companies provide essential public services. To ensure these services are provided, public utilities are heavily regulated by state, local, and federal government authorities.

Under the arrangement they have with the government, privately owned public utilities have several obligations to the customers they serve. These obligations include:

  • Public utilities must serve their communities by providing service to any member of the community served by that utility who requests it. This means a utility cannot engage in racial or other discrimination in providing services. It must serve all who request and pay for the services.
  • Public utilities must provide a minimum level of service. Under this obligation, the service provided must be safe for customers to use. If a problem with the service develops, the public utility has a duty to correct the problem. For example, if a storm causes downed power lines and blackouts, the utility must perform tree and power line removal, and restore the service.
  • Public utilities must charge customers only as permitted by the rate the utility has provided with the regulatory authority. By law, public utilities must file a document that outlines its services, charges, and rates. The public has the right to inspect this document.
  • Public utilities must provide services in good faith, and deal with customers fairly. This obligation to act in good faith is something the law implies, or “reads into,” the service contract between the utility and the customer. Acting in good faith and dealing fairly requires public utilities to respond to customer complaints, questions about bills, and to make terms of service clear.

Who Regulates Public Utilities?

Privately owned public utilities can be regulated at any level of government, including state, local (county, municipality, township), and federal government. Public utilities are regulated at the state and local level by government agencies. State agencies have names such as “Public Service Commission,” “Board of Public Utilities,” “Public Utility Regulatory Authority,” and similar designations. 

Local authorities that regulate public utilities have similar names. These local authorities are regulated by state authorities, or operate independently. When services that cross state lines are provided, the federal government acts as a regulator. 

For example, radio, television services cable transmit work by transmitting signals throughout the country. The name of the federal agency that regulates cable networks and Internet service providers is known as the Federal Communications Commission (FCC). Another example of a federal agency regulator is the Nuclear Regulatory Commission (NRC). This agency regulates nuclear power providers, to protect public safety and health.

What Are Regulated Utilities?

A privately owned regulated utility is one that is owned by investors, or shareholders. The utility is given a near or total monopoly on providing service in a given area. For example, in Long Island, New York, there is only one railroad company providing passenger (as opposed to freight only) transportation. 

This utility is known as the Long Island Rail Road (LIRR). The LIRR is run by the Metropolitan Transportation Authority (MTA). In turn, the MTA, a corporation, is run by a Board of Directors. The board members are appointed by the governor of the state of New York, as well as by county and borough officials. 

The MTA is an example of a transportation monopoly. It runs the Metro North commuter rail service and New York City transit system in addition to the LIRR. All of these services are monopolies. The MTA monopoly is subject to regulation with respect to each of its services. 

For example, the LIRR’s rates, hours of operation, and hiring and firing procedures, are regulated at the state and local level. The federal government’s Federal Railroad Administration regulates the LIRR’s drug and alcohol testing program. Other public utilities are also regulated at the state and federal level.

What Are Unregulated Utilities?

Unregulated utilities, sometimes called deregulated utilities, are not regulated by the government. They therefore have no government monopoly. Unregulated utilities provide services to customers, and are subject to competition by other companies.

The main difference between regulated and unregulated utilities is that regulated utilities, thorough monopoly, own an entire operation. For example, an electricity public utility controls the energy infrastructure (grid), the electricity meters, and the power lines. Consumers must use the services of the monopoly regulated utility, or go without the service. As such, customer choice is limited to non-existent. 

Deregulated utilities can compete with each other for customer business.  In theory, competition can lead to lower rates and greater consumer choice. Deregulated utilities, unlike regulated once, are not bound by rate restriction regulations. 

Some utilities have features of both regulated and deregulated utilities. For example, utilities known as rural electric cooperatives (RECs), which provide service in rural areas, are partially regulated by the federal government and partially self-regulated by local or regional boards of directors. 

Certain other utilities are regulated, but only at the municipal level. These utilities, called municipal utilities, are run by local city councils or town boards. These utilities typically provide necessary services such as water and electrical services.

Can I Sue a Public Utility Company for Bad Service or Negligence?

A privately owned public utility may be sued. However, the person filing suit cannot assert mere negligence. In other words, the person filing suit cannot allege that the train “is slow” on some days. To recover against a public utility, a customer must show that the utility’s delivery was grossly negligent.  In other words, the customer must show that the quality of service was sufficiently poor as to be completely out of line with reasonable customer expectations. Public utilities may also be sued by customers for deliberate misconduct.

What Are the Steps to Take to Sue a Public Utility Company?

Suing a utility company involves a series of steps. The person seeking to sue the utility may first be required to notify the utility of the complaint. A customer seeking to file a lawsuit against a public utility must file a summons and complaint on the company.  The public utility then files an answer. From there, litigation, culminating in trial, proceeds.

Do I Need a Lawyer?

If you have a legal issue involving a public utility, you should contact a government lawyer. An attorney near you who is experienced in government law can review your matter, and advise you how to proceed. The attorney can represent you at hearings and in court.