For Public Utilities Fortnightly's 75th Anniversary CEO issue, the magazine looked to the horizon and asked these new captains about the planned course for their...
Marketers and Brokers
Erroll B. Davis, Jr.President & CEO
Wisconsin Power & Light Co.
Gas distribution will continue to be a monopoly for most customers and will continue to operate in the regulated environment. Thus, there is no direct threat from marketers and brokers for most of the distribution business.
With respect to the traditional merchant role of LDCs, current regulatory statutes ensure that most utilities find little money to be made in the merchant function. WP&L happens to be an exception because of the performance-based rates we implemented on January 1, 1995. There is nothing in the future that gives LDCs a lock on the merchant function within their jurisdictions, and those not in a position to profit from their merchant activity should probably seek to exit this role. Gross receipts taxes, utility taxes, and other vestiges of a prior regulatory regime must eventually wither and die away if true competition and attendant customer benefits are to be realized.
Although WP&L still maintains a merchant function within its gas business, we have also realized the difficulty of competing with independent brokers and merchants outside of the utility framework. To address this market, Heartland Energy Services, we formed an unregulated subsidiary, under WPL Holdings, Inc., our parent company. HES now offers both gas and electricity brokering services.
James A. Carrigg
Chairman, President, & CEO
New York State Electric & Gas Corp.
Marketers/brokers do not pose a threat to LDCs. They compete for certain aspects of the retail gas business, specifically gas-supply management. Some distributors will compete with the marketers for this business; others will gradually abandon this function. LDC's face one major competitive disadvantage competing against marketers: state and local taxes. Legislation may be needed to correct this situation.
Patrick J. Maher
Chairman & CEO
Washington Gas Light Co.
Marketers and brokers are
competitors. They compete with one another and with LDCs.
Distributors are changing and seek to compete in markets in and beyond their traditional service areas on a brand-name basis. They are also forming strategic alliances and joining the competition for gas and capacity transactions. This is good news for customers.
Public policy should encourage distributors to compete, not attempt to limit their ability to deliver a broad array of gas and other energy-service products. Consumers stand to gain if distributors are added to the mix of full-service providers. After all, we can deliver streamed supplies, fixed-price deals, caps, collars, or anything customers want. Regulators, advocates, and distributors need to work together on rules that permit distributors or affiliates to market everywhere.
Chairman, President, & CEO
Connecticut Energy Corp.
Restructuring of the natural gas industry and recent legislative initiatives are presenting LDCs with significant challenges, not least of which is maintaining a competitive edge while shouldering the societal costs that other energy suppliers do not bear.
Societal costs come in a variety of guises: millions of dollars spent annually on conservation and economic development advertising programs, arrearage forgiveness, gross receipts taxes. These costs distort the market and skew the price of our service in favor of marketers who have been able