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Australia: Open Arms, Open Access, and the Outback

Fortnightly Magazine - June 15 1996

Gallaugher, technical director of national markets for the Victoria Power Exchange, says it may be too early to judge the Americans' record.

"As the new owners of these businesses, they are initially concentrating on internal cost controls, organizational structure, and service delivery to customers," he says. "The way in which these companies operate in the market may become more apparent as the retail franchise limit drops to 750 megawatt-hours on July 1, 1996." At regular intervals after that, distcos will have to compete for even smaller customers.

Whatever supplier customers choose, distcos can always count on being the deliverer of power, whether generators, power marketers, or another distco sells the electricity. "We always get paid the delivery charge," says Larry Folks, Entergy Power Group's vice president, responsible for Australian activities. "And we make 90 percent of our profits from the delivery charge."

"We're having some success in selling to customers outside our territory," says Buckman. "It really comes down to being able to

create a portfolio of price and duration that's consistent with the customer's needs. That's something we've had quite a bit of experience doing in the United States with wholesale customers."

Like the other distcos, Texas Utilities' Eastern Energy has been soliciting large industrial customers outside its service territory in Victoria. "I don't know that anybody has been more successful than anybody else," Gibbs says. "I think our experience in Eastern Energy has been we gained three customers and we lost three."

But Daniel L. Spalding, PacifiCorp senior vice president and Powercor chairman, voices another opinion.

"We've had more success than any of the other four Victoria distribution businesses in attracting customers from outside our service territory," says Spalding. "I want to say 28 [industrial] customers. And I would say the key for us was just to do your homework and learn about the market, learn about the customers you're shooting for."

Generally, Spalding says, the deals came down to price: "Very few of the players in the market to date have put a high premium on anything but price."

Powercor, located in the western part of Victoria, has grown its load the fastest (em 3.1 percent each year (em since 1986. That's 1 percent above the rest of the state.

Orchison, the ESAA official, says that opening the market to competition among distcos and power suppliers, and to progressively smaller customers through 2000, brought U.S. utilities to Australia in the first place, and will keep them there. From Victoria, competition will spread to the remaining Australian states.

However, utilities shouldn't expect to take their Victoria experience and put it, cookie-cutter style, into markets outside Australia.

"We are not England and Wales," Orchison says. "The United States is not Australia. Our situations are all different. And each of these jurisdictions has to sit down and look at its own needs and design a system that fits."

Gibbs says that learning how to operate in a new regulatory and competitive field has its merits, but knowledge isn't the sole attraction: "You don't go make a huge investment in a foreign country