Entering the Appliance Repair BusinessGordon Canning

Nearly 40 utilities now offer an appliance services program. Most take a similar approach: They cover appliances such as gas and water heaters, offer repair service only (no preventive maintenance), and charge a modest price ($50 to $60 per year). Bill inserts often carry the load for service promotion. Utility field personnel perform any necessary repair work.

Many of these programs have done very well in penetrating the market, often reaching 20 percent or more of residential heating customers within 8 to 10 years. This degree of market penetration reveals a strong latent demand for the service. In fact, the residential customer views the utility as a preferred provider.

Nevertheless, profitability may remain troubling. Some observers believe that many programs do not earn a profit on a full-cost basis. This concern should prompt utilities to examine a few key areas before entering the appliance service business.Local Contractor Resistance

Resistance from local contractors always looms when utilities enter the appliance business. Invariably, the local contractor community views utility involvement in service contracts as an infringement on its "territory" and unfair competition. Although many contractors have petitioned regulators and legislators, alleging cross-subsidization and unfair competition, no case has forced a utility to withdraw from the business. But the costs have proved substantial for both sides.