A few times, I stumble on the question “what are public utilities” and what does it benefit me?
Well, today, I’d be looking keenly at this question and hopefully, answer the question in an easy-to-grasp manner so you don’t mix it up.
Introduction: Public Utilities are Quite Essential
Public utilities are essential services that provide important functions to communities. Without them, many people would not have access to drinking water, electricity, or other basic services.
The challenge for the sector is how to grow a utility business when customer usage of utilities tends to be more cyclical than recurring.
Successful operators need to look at how they can better serve their customers and grow future customer patronage through partnerships, digitalization, and customer-centricity; while also balancing the needs of shareholders, who demand a return on their investment.
What is a public utility?
A public utility is a company that provides essential services to communities. It’s a type of business that provides services to customers without making a profit.
Public utilities are essential because they provide services that many businesses, including restaurants, pharmacies, and grocery stores, rely on to stay in business.
Public utilities also play a key role in communities’ quality of life. They help power our homes, run our hospitals and schools, provide water for our businesses and communities, and make it possible for us to have phone service and wireless service.
Many public utilities have also become important partners for communities, offering programs such as electric vehicle charging stations and green energy programs that help make communities more sustainable. You see, public utilities also have a long history of being a good investment.
Why are public utilities important?
Public utilities play an important role in communities by providing essential services such as electricity, water, transportation, and telecommunications. They also help power our homes, run our hospitals and schools, provide water for our businesses and communities, and make it possible for us to have phone service and wireless service. Public utilities also play a key role in the economy, helping to create jobs and develop new businesses.
Public utilities provide many benefits to customers, communities, employees, shareholders, and investors.
Public utilities are usually government-owned or regulated and depend on customer usage to generate revenue. Unlike private businesses, they are not dependent on shareholders and can take longer to generate revenue.
Key Points and Benefits of public utilities
- Low risk and low investment return. Public utilities generally have low investment returns because the returns generated by shareholders come from the use of customer revenue.
- Long-term customer retention. Public utilities have long-term customer relationships because customers have long-term service contracts with the utility. This can help reduce customer turnover costs.
- Low customer acquisition costs. Public utilities have low customer acquisition costs because they use customer revenue to provide service. This helps keep costs down.
- Low customer switching costs. Public utilities’ long-term contracts with customers help keep switching costs down.
- Low customer service cost. Public utilities have low customer service costs because they generate revenue through customer use.
- Low marketing and sales cost. Public utilities have low marketing and sales costs because they use customer revenue to provide marketing and sales services.
- Low research and development costs. Public utilities have low research and development costs because they use customer revenue to fund research and development.
Public utilities may be a good investment for investors who want to diversify their portfolios and protect their investments during uncertain economic times.
However, investors should be aware of the risks associated with public utilities and understand their investment objectives and risk tolerance to achieve the best results. Investors should consider the factors listed above to make an informed decision about whether investing in a public utility are right for them.