FERC is offering incentive rates to entice transmission investment. But the authors identify serious flaws in emerging policy regarding return on equity (ROE) incentive adders. Determining whether...
Entering the Appliance Repair BusinessGordon Canning
investment. Eventually, the utility can parlay these advantages into improved overall customer satisfaction. Second, a partnership effort can help blunt contractor resistance and even improve business practices and profitability among local private contractors.
A utility may view its role narrowly as simply supplying high-quality fuel and energy to its customers in an efficient and reliable manner, but the customer views the utility's role as warming the home, drying the clothes, or lighting the room and providing other more tangible results. A well-managed appliance service contract business improves the utility's product by increasing the reliability and efficiency of energy-using equipment. This effect can be substantial: A mature service contract program can reach 20 percent of the residential customer base.
A service contract business structured as a partnership can also help upgrade HVAC contracting practices. Contractors come in many "packages"-large and small, residential or commercial, sales or service-oriented, and specialized by brand and equipment type. They operate largely without accepted service standards. Customers often have trouble difficulty determining which contractors are reliable. But in a partnership structure, the utility first screens contractors against a set of standards that encourage contractors to improve performance. In the long term, this effect may prove the most significant advantage of entering the appliance service contracting business.NEED BIOCallout or Side Subhead
Appliance service contracting recalls many of the utility's core business skills-customer service, knowledge of the customer base, and a positive image.
SidebarAntitrust ConcernsLocal contractors may object if utilities invade the appliance business. Last year a Pennsylvania court said the state regulatory scheme gives antitrust immunity to utilities who offer cash grants to home builders to install heat pumps. But it warned that electrics could lose immunity if they tie heat pump promotions to "all-electric" restrictions in new homes. See, Yeager's Fuel, Inc. v. Pa. P&L Co., 22 F.3d 1260 (3d Cir.1994).
SidebarRegulatory ConcernsEntry into the appliance business may trigger oversight by state regulators if utility activities qualify as "promotional practices," as shown by these excerpts from Arkansas rules:Merchandise Sales. Merchandising [or financing] activities . . . not completely segregated from public utility activities and property shall be deemed promotional practices. . . . [I]f such activity is operated as a nonutility business [it] must meet the following requirements: Collection for financing is not made on the customer's utility bill
Utility payment records are not used for credit approval
[B]illing inserts are not used to advertise.Incidental Repairs. [P]romotional practices shall not include . . . [i]nspections, repairs, and service . . . to prevent hazardous conditions or service interruptions.See, Re Promotional Practices of Elec. & Gas Pub. Utils., Dkt. No. 90-205-R, Order No. 19, Jan. 25, 1994 (Ark.P.S.C.).
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