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Australia: Open Arms, Open Access, and the Outback

Fortnightly Magazine - June 15 1996

just to learn something if you can't make any money doing it."

"We would like to have three or four ... five good investments in Australia," says Folks. "We see it as an excellent country to do business in."

What utilities shouldn't forget is the larger picture, says Buckman. Customers are becoming increasingly global: "To be a company that can hope to provide customer service comparable to the service of American Express or Federal Express, we cannot hope to do that with a presence only in the Pacific Northwest."

But in their quest to become more in tune with customers, utilities are pausing along the way.

"The thing that they're learning is a great many of these customers don't understand their own load profile," Orchison says. "And, therefore, they have great difficulty negotiating satisfactory deals. It's all very well bringing in a market, but a market only functions well when you have a well-educated bunch of customers."

H. Dan Farell, managing director of Texas Utilities Australia, Pty., Ltd., believes that some providers will make mistakes in their zeal to capture new customers.

"They're going to be tempted by market share, as opposed to profitability. We're paying a lot of attention to trying to understand the real profitability of our various customers and this gets into understanding their load profile."

Then, load profiles can be modified to reduce power costs, Farell adds.

What the American expatriated companies also have to watch, he says, are impediments that remain within the once government-owned distcos. A bureaucratic mentality must be changed to a bottom-line mentality. Distributors mustn't see themselves as commodity providers; they must provide service. Marketing, too, has to be emphasized. The public needs to be educated on energy technologies and the "plain, old-fashioned efficient use of electricity."

The real test of the American-Australian utility experience will be the bottom line. Can strategic alliances be made, industrial customers be won and lost, while costs for consumers are kept low through improved economies of scale? Can more layoffs be avoided and energy quality maintained?

"I think this is the real test that these privatized companies face," Orchison says. "In order to run the leanest organization they can, they will continue to downsize their staff. It is a very ticklish business in terms of maintaining quality and supply if you are cutting into muscle instead of fat. And there are dangers there. These companies are going to have to tread very carefully."

From 1988 to early 1995, Australia's electricity workforce has been reduced from 82,000 to 46,000.

"So a hell of a lot of this has already happened, and the lights haven't gone out," Orchison says. "The unions haven't gone on permanent strike. It's actually being managed reasonably well. The element that has changed in Victoria is that we now have a bunch of companies, and what's more they are foreign companies who are in this 'to make a buck.' And that means that the public views it all through a somewhat different lens."

Powercor has been part of the asset rationalization, reducing its headcount from 1,500