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Utilities firms play integral roles in creating wealth in both the developed and developing worlds as investments made by this industry create a network of infrastructure that allows for the delivery of energy needed to fuel economic growth. Affordable and reliable energy, for example, is made possible by utilities companies through the construction of integrated cable networks and pipelines. These infrastructures are important to household productivity and the development of most industries, from agriculture to finance to health care to communications. While the utilities industry, construed broadly, includes engineering, infrastructure, telecommunications, and water services, this report focuses only on firms engaged in the distribution and transmission of electricity and gas, as well as utility companies with significantly diversified activities in addition to core electric, gas, and water utility operations.
Energy produced by utilities for residential use is, for the most part, a necessity that is little affected by economic conditions. People will generally pay what it costs to heat or air-condition their homes, regardless of the strain on their incomes. In this aspect, utilities are considered a noncyclical industry, since the industry’s fortunes are not correlated with the overall economy. On the commercial side, however, businesses may cut back on industrial plant and office space usage in tough economic times, making this segment of the industry dependent on business profits and expansion.
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