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The Electric and Gas Industries are Converging: What Does it Mean?

Fortnightly Magazine - April 1 1995

did not go forth and laboriously build a book of business. Captive energy users were delivered by the thousands or millions to each utility through the device of the franchised service area. Consumer marketing is, thus, hardly a core competence of the typical utility. Finally, most utilities, despite their access to every consumer in their service area, barely know the individual needs, circumstances, and desires of the consumer (em much less design tailored services.

The future of energy retailing, however, is customizing and delivering services for each consumer by endlessly combining and recombining the product features most valued by that consumer into a unique energy package.

A utility culture dedicated to the proposition that money is made by obtaining the highest possible allowable rate of return on the largest possible rate base will find it very difficult to adopt a retailing culture that makes its money by pleasing the customer. Each customer has a different sense of what is valuable because each consumer is unique. Value is created by meeting felt or unarticulated needs and solving problems. Value is created by delivering benefits at the meter, the mailbox, and the video screen (em not just by producing electrons at the busbar or making the gas pipelines roar.

Before the decade is out, many consumers could have the ability to exploit directly all the advantages of cyberspace marketing and turn proliferating choice into expanding benefits for themselves. These consumers will be as diverse as the purchasing manager for a multilocation assembly company, the president of a winery, the administrator of a school district or hospital, the general manager of a chain of hotels, the owner of a bakery, and eventually, the homeowner. Each will be empowered by cyberspace retailing to summon all the information needed to analyze and select energy products and services; scroll through and peruse electronic catalogs; screen and query Net merchants; solicit, compare, and accept offers; negotiate directly on the screen; record an order for a service or package of services; choose the invoicing format, pricing structure, and payment method; instruct that charges be made to a desired credit or debit card (perhaps an affinity group card from a telecommunications, consumer retailing, or personal financial services company); and enter his or her speech recognition password into the automated and interactive customer service system of the preferred Net merchant.

DELIVERY SYSTEMS AND VANISHING CAPITAL

Once the structural change is complete, a truly integrated gas/electric energy delivery system will emerge around 2010. There will be few purely gas or purely electric companies, except, perhaps, at the local regulated distribution (small wire, small pipe) level. Instead, we will see gas/electric producers; gas/electric network companies (owners of big pipe and big wire) to move molecules and electrons long distances; gas/electric wholesalers and traders to buy and sell and trade bulk molecules and electrons; and unregulated gas/electric retailers to deliver energy price/performance benefits to all consumers, including homeowners, transporting energy to the final meter via regulated little pipe and little wire logistical firms.

Regulators and legislators will gradually (suddenly, in some states) adjust to the