Deregulation brings fresh opportunities

Issue 11 and Volume 100.

Deregulation brings fresh opportunities

By Teresa Hansen, Associate Editor

The changes electric utilities are facing today are both scary and exciting. In the past several years utilities have faced uncertainties, causing major upheaval in their structures and business processes. Mergers and acquisitions multiply as utilities position themselves for competition. Many employees have faced layoffs, resulting from reengineering and downsizing. Although these events have been difficult and unpleasant, there is a bright side. Today`s electric utilities have the opportunity to cash in on some innovative new ideas and technologies. Just as with the airline and telecommunications industries, electric utilities have been given opportunities to increase revenue while improving services to their customers. These opportunities not only played a major role in the success of existing airline and telecommunications companies, they also opened the field to new players. Many experts believe the same is likely to happen in the deregulated electric utility industry. Experts also believe information technology (IT) will be at the heart of successful electric utilities, just as it is in today`s major airline and telecommunications companies.

IT fuels deregulation

Olivia Hecth, Bay Networks Inc., and Michael Cooper, Boston Edison, discussed the role of IT in the deregulated utility industry in their paper, “Managing Change in the Face of Deregulation,” presented at the 1996 UTC Conference. The two speakers pointed out how the successful and innovative use of technology can separate the thriving companies from those that will disappear from the business landscape. By comparing the business challenges faced by the airline industry with the challenges facing the electric utility industry, lessons can be learned regarding successful strategies and companies and those that failed, Hecth said. Airlines that began offering value-added services along with lower rates tended to fair best. IT has been a major contributor to the success of air value added programs as computerized reservation systems have had a huge impact on both the industry and the consumer`s perception of the industry. IT evolved from a mere support system to the lifeblood of business operations, revolutionizing the airlines, they said.

Most people in the utility industry agree that customer-focused areas will be the “hot activity” of the future. New services will be information intensive, making IT a key element in future success. “Technology is the propellant driving restructuring,” said Robert Beason, Southern Co.`s telecommunications vice president. He said that once a utility determines its strategy in the new deregulated environment, technology will make that strategy a reality. Some utilities are already conducting pilot projects in preparation for competition–testing everything from remote meter reading and remote appliance control to home security and telemedicine. Each utility must find its own balance, which is easier said than done.

States push for competition

Some utilities are running out of time. California and Massachusetts are aggressively moving toward deregulation and utilities in these states have just over a year to get positioned for competition. In both states, retail customers are scheduled for direct access to the competitive electric generation market by Jan. 1, 1998. This means that utilities in those states are already frantically working on technology that will not only allow them to meet their state`s requirements, but that will also set them apart from the competition. Wisconsin is also taking strides toward deregulation. According to Scott Neitzel, a commissioner with the Wisconsin Public Service Commission (PSC), Wisconsin decided to get involved in the restructuring process to help ensure that the laws and policies resulting from deregulation do not come only from high-cost, large, politically pressured utilities. Wisconsin has mandated customer choice of electricity generators in four years. This gives the state`s utilities a bit longer to prepare for competition.

Wisconsin is making performance standards the first priority. The state PSC has been involved in customer forums, revealing that the biggest customer concern is reliability. The commission wants to ensure that electric utility customers continue to receive reliable power. Neitzel stressed that customers must be given information about their choices. Until the public decides it wants the benefits of competition and choice, utilities are faced with a dilemma, he said. Utilities must determine how and at what price to get the information to the customer.

Some utilities are finding that Neitzel is not far off the mark. While they are aware of the need to develop new services, many utilities lack the expertise, time or money to make the new services a reality. Utilities are trying to decide which services to offer and whether to partner with other utilities and service companies or go it alone. New companies are springing up, prepared to help utilities conduct market surveys to determine what customers want and then develop the software and technology needed to provide the desired services. Many of these service companies have already conducted extensive research and deployed software and technology in the field. Their goal is to provide utilities with the tools needed to succeed in a competitive environment and allow customers to improve the quality of their lives and make their businesses more competitive.