Tilting Toward Telephony: How Electric and Gas Companies Can Leverage Their Systems for a Changing Market

Fortnightly Magazine - June 1 1995
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The structure of the utility and telecommunications industries has changed significantly since I began my role as a regulator 15 years ago. Technological developments and a competitive environment, as opposed to regulation, have provided the major catalyst for change. As a result, utility companies, which have historically enjoyed the favor of Wall Street investors, will soon face unprecedented revenue growth problems. Because of the industry's maturity, its limited growth potential, and the possibility of facing mandatory retail wheeling from other utilities with lower production costs, utilities can no longer afford to operate under traditional management principles. Regulators must adapt policy to these changes to minimize uncertainty in investment as well as to balance consumer welfare with sound economic and financial principles.

Electric and gas utilities, and gas pipeline companies, face increasingly competitive markets as state governments attempt to eliminate barriers to competition. Some

state regulators (em the California Public Utilities Commission, for example (em are considering retail competition in local power generation and distribution markets. Technological advances are also contributing to the growth of competition. New power generation technologies can now provide energy at a lower cost than existing utility power systems.

Last year Congress failed to pass long-overdue legislation to replace the Communications Act of 1934; this year it has set an aggressive agenda to that end. New legislation will likely eliminate some of the barriers that prevent utilities and other companies from offering telecommunications services.

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