Utility service territories are typically geographically distinct from one another.
These territories may be set by regulation or by economics as the capital cost of
reproducing infrastructure is usually prohibitive. Each territory is composed of
different types of consumers, usually broadly described as either commercial, residential
Electricity consumers are divided into classes of service or sectors (residential,
commercial, industrial, and other) based on the type of service they receive. Sectoral
classification of consumers is determined by each utility and is based on various
criteria such as:
An electric power system is a group of generation, transmission, distribution, communication,
and other facilities that are physically connected. The flow of electricity with
the system is maintained and controlled by dispatch centers. It is the responsibility
of the dispatch center to match the supply of electricity with the demand. In order
to carry out its responsibilities, the dispatch center is authorized to buy and
sell electricity based on system requirements. The interconnected utilities within
each power grid coordinate operations and may buy and sell power among themselves.
The bulk power system makes it possible for utilities to engage in wholesale (for
resale) electric power trade. Wholesale trade has historically played an important
role, allowing utilities to reduce power costs, increase power supply options, and
improve reliability. Authority for those transactions has been pre-approved under
interconnection agreements signed by all the electric utilities physically interconnected
or with coordination agreements among utilities that are not connected.