SEED Plan for Utilities
This article outlines the important functions of the Utility industry along with their employment and salary trends observed over five years.
The Utility industry contributes to the smooth functioning and maintenance of modern society. This industry is unique in its operations and is one of the few that stays unaffected by economic downturns. Companies in this industry ensure that basic amenities such as electricity and drinking water reach every household. However, considering their invaluable contribution in a forever competitive market, this industry in the US is regulated by the Public Utility Commission (PUC).
Utilities Companies
By definition, utilities are those energy-related services provided mostly by the government without which a modern household will not function. But how does this sector work? Why are these companies required to act as a buffer between consumers and the public sector energy producers? Let’s take a look.
What Utilities companies do? Why are they important?
The Utilities industry builds and maintains infrastructures that ensure the availability of all Utility services to the wider population. This includes electricity, natural gas, water, sewage management services, wind turbine energy, and solar panels. Setting up the infrastructure to procure and distribute these services is a labor-intensive job and mostly handled regionally. Since these are part of the public service, this sector is heavily regulated in terms of profits.
There are three types of Utility companies: For-profit, City-owned, and Rural Cooperatives. Some produce, while others distribute or act as brokers between large companies and consumers. Since companies of the Utilities industry directly link the consumers with the utility service producers, the chances of monopoly are high. This is why all pricing/amendment proposals in the US Utility industry are subject to approval by the Public Utility Commission (PUC).
However, from an investors’ point of view, Utility companies are a good source of reliable dividends and profits. Revenue generation in this sector is less volatile compared to other equity markets. Hence investors prefer to have long-term investments in this sector. Mostly, natural gas production and distribution is handled by for-profit companies. Water is mostly city-owned and electricity is handled by rural electric cooperatives. Thus companies in the Utilities industry contribute to:
- Ensuring power and energy demands of the population is well served. They also play an important role in estimating demand in this sector
- Providing smooth functioning customer service at affordable prices
- Providing backup in case of power breakdowns, accidents, wear and tear of infrastructure, natural calamities, etc
- Providing investment opportunities in bonds, ETFs, and company stocks
- Providing long term investment opportunities with steady flow of dividends and profits even during recession
Industry Forecast
The Utilities industry is set for gains in the coming years, with a forecast from an Ibis industry report of 9.6% growth in 2021. A similar forecast by Interindustry Economic Research Fund predicted a 6.1% growth in 2021, showing growth potential in the sector over the next few years. This indicates the continuing reliance on this sector for providing services to the public and its reliance on these companies.
Types of Utilities
The Utilities industry has been historically monopolistic. This is more because this industry has always focused on regional operations. However, with changing market trends and growing competition, this industry is broadly classified into 4 categories:
- Power generators: Companies that produce electrical power
- Network Operators: There are three main energy network operators in the Utilities industry: Grid operators, regional network operators, and distribution network operators. The function of these operators is to sell access to their networks to retail service providers.
- Traders and Marketers: This category of companies creates products that enable buying and selling energy futures. They ensure consumers receive a stable supply of electricity at stable and affordable prices.
- Service providers and Retailers: These companies run the last mile delivery service. Consumers can choose from various service providers.
Utilities Industry Statistics
By number of firms:
| # of employees | Average | 2017 | 2016 | 2015 | 2014 | 2013 |
|---|---|---|---|---|---|---|
| 0-9 | 67.73% | 67.33% | 67.67% | 67.40% | 67.97% | 68.25% |
| 10-19 | 8.49% | 8.80% | 8.42% | 8.78% | 8.38% | 8.09% |
| 20-49 | 9.28% | 8.96% | 9.43% | 9.34% | 9.31% | 9.36% |
| 50-99 | 5.92% | 6.01% | 5.84% | 5.95% | 5.86% | 5.92% |
| 100-199 | 3.24% | 3.47% | 3.28% | 3.17% | 3.14% | 3.13% |
| 200-499 | 2.04% | 1.98% | 2.05% | 2.10% | 2.10% | 1.96% |
| 500+ | 3.30% | 3.44% | 3.31% | 3.26% | 3.23% | 3.28% |
On an average 67.73% firms of the Utilities industry employ less than 10 people. This trend has remained nearly the same between 2013 and 2017. The second largest groups are the firms employing 20 – 49 people forming only 9.28% of the industry. This is closely followed by 8.49% firms having 10- 19 employees in the third position. Firms with 200 – 499 employees were the least in number.
Overall the utilities industry is dominated by small firms with 0 – 9 employees.
By number of employees:
| # of employees | Average | 2017 | 2016 | 2015 | 2014 | 2013 |
|---|---|---|---|---|---|---|
| 0-9 | 1.91% | 1.87% | 1.93% | 1.90% | 1.92% | 1.91% |
| 10-19 | 1.06% | 1.10% | 1.06% | 1.09% | 1.05% | 1.02% |
| 20-49 | 2.63% | 2.54% | 2.67% | 2.63% | 2.65% | 2.67% |
| 50-99 | 3.60% | 3.68% | 3.55% | 3.63% | 3.57% | 3.60% |
| 100-199 | 3.59% | 3.84% | 3.59% | 3.55% | 3.52% | 3.46% |
| 200-499 | 4.63% | 4.31% | 4.60% | 4.81% | 4.80% | 4.63% |
| 500+ | 82.58% | 82.67% | 82.61% | 82.40% | 82.50% | 82.72% |
In the utilities industry, 82.58% of the workforce was employed in firms with more than 500 employees. All other firms with varying employee strengths contributed to the rest of the workforce with firms having 10 – 19 employees accounting for the least. This trend has remained consistent since 2013.
It is quite evident from this data that the majority workforce in the utilities industry historically prefers to work in large companies that employ more than 500 workers. Thus larger companies may wish to consider ESOPs in the Utilities industry.
Top Jobs/ Average wages per job:
| 2019 | 2019 | 2019 | 2018 | 2017 | |
|---|---|---|---|---|---|
| Employment | Employment % | Average Salary | Average Salary | Average Salary | |
| All Occupations | 547,100 | 100.00% | $81,550 | $79,290 | $77,350 |
| Installation, Maintenance, and Repair Occupations | 146,900 | 26.85% | $77,520 | $75,550 | $73,920 |
| Other Installation, Maintenance, and Repair Occupations | 105,570 | 19.30% | $74,010 | $71,900 | $70,380 |
| Office and Administrative Support Occupations | 87,820 | 16.05% | $55,180 | $54,190 | $52,770 |
| Production Occupations | 77,180 | 14.11% | $77,270 | $75,800 | $74,370 |
| Line Installers and Repairers | 58,920 | 10.77% | $78,990 | $76,460 | $74,830 |
| Plant and System Operators | 58,190 | 10.64% | $74,430 | $73,290 | $72,360 |
| Electrical Power-Line Installers and Repairers | 57,240 | 10.46% | $78,840 | $76,350 | $74,730 |
| Architecture and Engineering Occupations | 50,340 | 9.20% | $96,840 | $93,130 | $91,610 |
| Business and Financial Operations Occupations | 48,350 | 8.84% | $89,690 | $87,310 | $85,920 |
| Management Occupations | 41,580 | 7.60% | $141,640 | $138,680 | $136,490 |
| Business Operations Specialists | 38,020 | 6.95% | $90,830 | $88,110 | $86,490 |
| Engineers | 35,560 | 6.50% | $105,460 | $100,760 | $99,130 |
| Power Plant Operators, Distributors, and Dispatchers | 34,800 | 6.36% | $85,890 | $83,380 | $81,480 |
| Construction and Extraction Occupations | 31,710 | 5.80% | $69,360 | $68,000 | $67,020 |
| Information and Record Clerks | 30,960 | 5.66% | $51,830 | $50,640 | $49,180 |
| Customer Service Representatives | 29,350 | 5.36% | $51,960 | $50,830 | $49,340 |
| Construction Trades Workers | 23,240 | 4.25% | $66,310 | $65,240 | $64,450 |
| Power Plant Operators | 23,120 | 4.23% | $81,940 | $80,270 | $78,290 |
| Control and Valve Installers and Repairers | 21,220 | 3.88% | $72,790 | $70,830 | $68,740 |
| First-Line Supervisors of Mechanics, Installers, and Repairers | 20,010 | 3.66% | $93,290 | $92,480 | $91,160 |
| Electrical and Electronics Engineers | 19,710 | 3.60% | $102,480 | $99,250 | $79,270 |
| Computer and Mathematical Occupations | 19,480 | 3.56% | $94,320 | $92,510 | $91,550 |
| Electrical Engineers | 19,370 | 3.54% | $102,340 | $99,260 | $96,840 |
| Computer Occupations | 18,680 | 3.41% | $94,450 | $92,790 | $91,910 |
| Material Recording, Scheduling, Dispatching, and Distributing Workers | 18,420 | 3.37% | $57,780 | $57,200 | $55,630 |
| Electrical and Electronic Equipment Mechanics, Installers, and Repairers | 16,430 | 3.00% | $83,150 | $81,390 | $96,840 |
| Miscellaneous Electrical and Electronic Equipment Mechanics, Installers, and Repairers | 15,900 | 2.91% | $83,490 | $81,590 | $79,330 |
| Water and Wastewater Treatment Plant and System Operators | 15,520 | 2.84% | $48,850 | $46,690 | $46,560 |
| Electrical and Electronics Repairers, Powerhouse, Substation, and Relay | 14,610 | 2.67% | $83,880 | $81,910 | $79,860 |
| Operations Specialties Managers | 14,220 | 2.60% | $138,780 | $135,070 | $134,130 |
| Drafters, Engineering Technicians, and Mapping Technicians | 13,720 | 2.51% | $75,440 | $73,690 | $72,100 |
The classifications for these occupations often overlap one another, so total employment size % may result in a larger number than 100% for all jobs.
Based on the data of 547,100 workers it is evident that there has been a clear rise in the average salaries by 5.43% between 2016 – 19. The average salary of workers of the Utilities industry was $77,350 in 2017 that escalated to $81,550 by 2019 showing a consistent rise of around 2% every year. The top five high paying job profiles in the Utilities industry are:
- Installation, Maintenance, and Repair Occupations
- Other Installation, Maintenance, and Repair Occupations
- Office and Administrative Support Occupations
- Production Occupations
- Line Installers and Repairers
The installation, maintenance, and repair occupation absorbs 26.85% of the Utilities industry workforce. In 2017 the average salary was $73,920. By 2019 this figure reached $77,520 – a substantial jump of 5%. This trend indicates that this job profile has been in high demand and employees have found it to be financially rewarding over the years.
The second largest employable job profiles in the Utilities industry are the complementary activities that support the installation, maintenance, and repair occupations profile. This section forms 19.30% of the workforce. This profile has also posted a growth of 5% in the average salaries beginning with $70,380 in 2017 and shooting up to $74,010 by 2019.
The office and administrative support occupations is the third category of preferred jobs in the Utilities sector with a 16.05% employment rate in 2019. This profile too posted a 5% growth in average salaries between 2017 – 19 starting with $52,770 and accelerating to $55,180 by 2019.
Production occupations form 14.11% of the total Utilities sector jobs. Between 2016 -19 the average salary of this job profile posted a year on year growth of approximately 2%. In 2017, the average salary of employees of this profile was $74,370. By 2019, this figure became $77,270, demonstrating an overall jump of 4% in three years.
The fifth most preferred job profile in the Utilities industry is that of the Line Installers and Repairers. This profile engaged 10.77% of the entire workforce in 2019. Salaries for this profile have shown an upward trend as well. In 2017, a new recruit for this profile could expect an average salary of $74,830 while by 2019, this figure became $78,990, which is an 5.5% rise in three years.
ESOP in Utilities
ESOP or the Employee Stock Ownership Plan is an ingenious way of inviting employees to become owners of a company. Employees are granted stock options in a phased manner until the entire company eventually becomes employee-owned. ESOP is generally part of retirement plans and is a good way to incentivize and motivate employees to realize the synergy in their hard work and company growth.
Why is offering ESOP a better option for Utilities companies?
Utility industry jobs are high risk, desk-less roles. Besides, as the sector continues to grow and expand, technology upgrades and mergers & acquisitions are pretty common. As a result this industry usually has a low scope of employee engagement. However, according to the ESOP Association close to 84% of the companies that had converted to ESOP reported higher levels of employee motivation. Thus a sense of ownership in the company might bring about a positive shift in employee attitudes in this industry.
SEED by Eqvista – Plan for Utilities
SEED stands for Simple employee equity development. This is a unique ESOP scheme designed by Eqvista that caters to all equity needs of the industry. This is well suited for the Utilities sector as there is provision for companies of all sizes ranging from 0 – 9 employees up to those firms employing more than 500. SEED is customized to various employee types as well: entry-level, medium, and senior staff. Stock options can be granted as time based, milestone based, or as a combination of the two. However, the percentage varies based on the type of company and seniority of staff.
Vesting schedules are suggested to be for 3 years with a one year cliff. In some cases, this could be 4 years as well. However, the employee stock option pool is suggested to be at 10% for formative startups and up to 20% for large companies. SEED by Eqvista is a comprehensive ESOP plan that is designed to suit all employee equity needs of the Utility industry. ESOP is an important inclusion to build competitive companies where employees have access to equitable wealth.
Interested to Start a SEED plan for your company?
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