INTRODUCTION: MEANING OF PUBLIC UTILITIES

Public enterprises produce goods and services which are very essential for
buman life. Utilities like water supply and sewerage boards, electricity boards,
transport, gas companies etc., are run as public utilities. These are run with public
welfare as the primary objective.
They are organized as monopolies under the control of the government. Rea
 Publle Utlltles Law
10
so
prices are charged fromthe public that everyone should
sonable be
these services ahle to
and consume that
an organization furnishes everyday
an
Apublic utilityis term utilities refer to the set of services

electripcriotvyi,dednecevity
large. The
the public at the public including watef,
organizations consumed byessentials. .Utilities
by the
privatnealtyuralone:
and other may be publicly or
telephoneservice, private businesses.
are operated as
but most
public utility is an organization that maintains the
Thus, a
infrastruture.
apublic service. These public utilities are subject to forms of public control a

regulation ranging from

local community-based groups to statewide
monopolies.
Insimpler words, public utilities arethose business undertakings which provi govermme
necessary servicesto the society. The undertakings dealing with the supply of ele.
water and transport etc. are all cOveredunder public
tricity, gas, power, needed in the day-to-day life of the people.
are
services. Allthese things
The undertakings dealing with public utilities require large scale capital inves
ments. It isexpected thatthe services should|be provided at reasonable rates. Pub
monopoly concerns. The entry
of other
utilities tend to be
barred by the
government. entrepreneurs
in thes
fields is generally
purpose of making public utilities as monopoly Concerns to serve th
The
consumers in a better way and to provide services at cheap rates. Certain speCi
these concerns with view toimprove their
a
privileges are also given
to working
UTILITIES
CHARACTERISTICS OF PUBLIC
Supply of essential goods and services:
1. indispensah.
utilities produce and supply goods and services which are
Public severe hardship if these services are nr
Society would be put to
for human life. services which are essential f
provide goodsand
made available. Public utilities relating to water supply and sewerag
provide goods and services
human life. They
electricity, transport, gas supply etc.
2. Local in character: local ars
enterprises are local in character. They operate in specified
Public
public utility serving its needs.
Each particular locality would have a
3. Consumer Protection:
The supply ofservicesic
Public utilities are meant for serving the consumers. maintained. These utlt
electricity, water, power, transport should be adequately also be provided at reas
are very essential for the public. These services should exploitationispossid
Consumer
able rates. These services being basic necessities, pricesbutthey
shou
The supply of essential services should not only be at lower
be constantly maintained.
 Publie Utties Law
11

4. Monopoly Position:
These undertakings are the outcome of special legislations and are given mo-
nopolyina particular area. This monopoly position is necessary to avoid
duplicationfor
nprovidingthese services. These undertakings require large capital investments
Small investors cannot enter
Want of resources. these fields. The supply of essential
services should be maintained regularly. Public utility service can be well main-
tained when the power to operate in a field is absolute.
5. Special Franchise:
lie utility concerns are given special
powers and privileges so
od satisfactory supply is maintained. The privileges and special status isthat regular
conferred
bythe legislations passed for creating those concerns. Franchise is a
charter of
special powers, privileges and duties as well. Public utility concerns may
and use publicproperty, if necessary. The powers are given in good faith acquire
and these
concerns should not make misuse of these powers.
6. Large Investments:
Public utility concerns require large investments of capital. The
ein fxed assets. In case of investments are
railways, large amounts are spent on providing
oilwaylines, purchase of engines and wagons and
dhe same way, electricity concerns require large constructing railway stations. In
investment on setting up lines. The
eynansion of supply of these services reduces cost per unit as no additional invest
ment is required. Cost per unit will go on decreasing with the
expansion in service.
7. Public Regulations:
Public utility undertakings are generally created by special
legislation of Par
liament and state legislature. Indian Railways are set up under a special
act of
Parliament. Electricity Boards are set up in different states by state
Special acts are necessary because certain special powers and privileges legislatures.
are needed
to maintain regular and efficient service,
8. No Business Risks:
The demand for public utility always remains. So there is no risk on this
score.
There is no fear of competition because of monopolistic conditions. The demand for
these services is both direct and derived. The use of electricity in the
house is a
direct demand and the use of power for running engines is a derived demand. There
always a possibility of increase in demand. So, public utility undertakings do not
suffer from business risks as other undertakings suffer.
9. Pricing Policies:
The primary aim of public utility services is to help the society in getting
essential services at reasonable prices. The prices are also affected by the nature of
demand and laws of returns. These concerns operate under decreasing cost condi
tions. So, they should charge reasonable prices. The pricing policy of these under
takings is generally guided by the government.
 Publle UtilMties Law
12
10. Inelastic demand:
provided
The demand for goods and services servicesby
nature. They provide essential goods and whipublchic utilities
member of the society. Any disruption in production would are
is
severe problems. Considering the fact that
demand is
lead to
required inelantie
private sector there is possibility of large scale
running public utilities.
inelastic and if
exploitation, the
takes the responsibility of
I1. Non-transferability of demand:
Aconsumer of a public utility cannot transfer his
govermert unde
because, public utilities operate as monopolies, and demand to any
therefore transfer anotof he
not possible.
For e.g. if any consumer of electricity in Madhya Pradesh is demand
the service provided by MPEB (Madhya Pradesh
have the option of switching over to any other Electricity Board) he
service provider. dis aisied wit
consumer can have a choice only
12. Government franchise:
if he moves to Some other State
1However, te,
Franchise can be said to be a contract
between the
public
period ofutility a.
the government company. The franchise is given for a
franchise permits the public utility to use public placesspecified
ment building to lay cables, run wires etc.,
such as
roads and time.Tt.
govet-
FORMS OF PUBLIC UTILITY UNDERTAKINGS
The form of public utility
undertakings depends upon the nature and tyne
service provided by them. The ownership of these
to be in government hands. It undertakings
is always prefeei
ensures regular supply of these services without ant
discrimination to consumers. It also helps to protect the
Generally, following forms may be used for these interests of consumers.
() Public authority. undertakings:
(ii) Private company operating
(ii) Joint ownership
under limited monopoly.
(iv) Public utility
concerns i.e., Public and Private Companies.
trusts.
The preference is always for a
Under government control, it may form owned and controlled by the govemme.
be departmental form, a
government company. public corporationo
PRIVILEGES AND OBLIGATIONS OF PUBLIC UTILITY SERVICES
Privileges or Rights:
To
lic utility maintain efficient and regular
concerns:
() The entry
service certain privileges are allowed to put
into public utility services Parli
is determined by an Act of
 Publie Utlties Law 13

ment or ofastate legislature. It restricts the entry of other persons into

that field. Competition in public utilities is not allowed.
(ii) They have right to use public property like streets etc. for fixing
appliances etc. A water supply company may dig a road to lay down
its pipes, thus disturbing the traffic.
(iti) These undertakings are allowed to charge reasonable rates for their
services rendered for goods supplied. A fair rate of returm is allowed to
them. They also have the right to charge different prices from different
buyers based on their price elasticity.
(iv) It has the rights of 'eminent domain'. Under this right they can acquire
public property for its use on payment of compensation.
Obligations or Duties:
) tis the duty of public utility undertakings to provide services to each and
every person without any discrimination of caste and creed.
(ii) The services should be supplied as and when required. Certain rules and
regulations should be framed to standardize the use of public utilities.
(ii) The services should be supplied through safest equipment's.
(iv) The services should be supplied at reasonable rates so that all sections of
society may be able to utilize them.
(v) Duty to use the full capacity to provide services to all consumers requiring
the product or service produced by the public utility.
manner.
(vi) Duty to provide safe and adequate service in a timely