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Frontlines

Fortnightly Magazine - May 15 1995

this leg, says Neilson, unless the utility really wants to enter the video or telephone business. But for transporting data back to the office, utilities can profitably employ a wide variety of media (em

including fiber or coaxial (em depending on cost.

"Identify your need; then make the technology pay for itself," advises Neilson. He's not against fiber to the home, but questions whether utilities need it for meter reading. "With the available compression techniques, wireless meter reading is well-suited for load control or real-time pricing," says Neilson. "Especially for gas meters, where the power supply must come from low-power batteries."

Edwards, at CellNet, acknowledges that broadband offers muscle for data transport, but notes that most of the costs actually lie in data format conversion, which is made easier and cheaper via wireless networks. "If utilities want to go into broadband," says Edwards, "then fiber and coaxial is the way to go." But are electrics really ready to compete in that market?

"They're chasing phantom markets," says Edwards. "I can't see electric customers paying for these superhighway services."

Marketing Rights

These alliances focus on retail energy service, which remains largely a regulated monopoly. That fact carries important implications for electric investment in superhighway projects.

Wholesale power is becoming (has become) a commodity business. People like Robert Mango (manager of derivative products at Niagara Mohawk) or John Woodley (senior trader at Morgan Stanley) will talk your ear off on how financial commodity markets will shrink wholesale electric margins down to nothing.

Now the wholesale market is exactly where the new power marketers and brokers have been earning their living (em using databases, software, and risk-hedging to siphon off profits. But as margins evaporate, these marketers will probably turn more to the retail side. Is that why some of these electric utilities are seeking out alliances with telcos and cable companies (em to put their own software in place before they get squeezed out again by the marketers and brokers?

One of the interesting things about the PSE&G project with AT&T is how the utility has managed to share the risk with other partners. In this case, AT&T is heading up the project, but is drawing on many other prominent customers with niche expertise, such as Honeywell (for thermostats), General Electric (for two-way electronic meters), Intellon (for chips and the in-home local area network), and Andersen Consulting (for a user-friendly, computer-customer interface). PSE&G will not build its own fiber network. Instead, it will lease either fiber or coaxial cable, linked to its own gateway in the telephone central office. PSE&G won't enter the telecommunications business as a competitor.

I asked Ralph Izzo, a vice president at PSE&G, "You're assuming, aren't you, that you can fight off competition from marketers by playing their own game in retail distribution." Izzo paused and listened carefully. I continued.

"But if electric distribution remains a regulated monopoly, isn't it possible that state regulators will force utilities to disclose or share customer profile data collected on the information superhighway, for the reason that distribution information is clothed with a public