A service territory defines the geographic area where a utility is allowed and required to provide services. Typically, a utility has monopoly rights as the only provider within its service territory. (In a very few exceptions there are two providers whose service territories overlap slightly.) While some utilities are monopoly providers of both supply and distribution service, in many areas other providers can offer supply service while the utility remains the monopoly provider of distribution service. The reason that utilities are the only entities allowed to provide distribution service is that it is cheaper for a single provider to offer this service than it is to have multiple providers compete. This is primarily due to the cost of the infrastructure required to provide service. It is also desirable for aesthetic purposes to have a single provider.
Services are provided to various types of ratepayers under the utility’s approved tariffs, which detail the rates, rules, and terms of service. Utilities have an obligation to serve all customers within their service territory. They must also provide service on a non-discriminatory basis, which means similarly situated customers are offered the same services under the same terms.
Combined gas and electric utilities often have different service territories for gas service and electric service. So, in areas that do not overlap, the utility may compete with another utility for the service it does not offer in that area. Detailed service territory maps are part of a utility’s tariffs and can often be found on the utility’s website.